VAT Reverse Charge for Building and Construction Services Manual

VATREVCON38000 - How the construction reverse charge works: Payments on account

The POA regime requires businesses with a total VAT liability of £2.3 million or more in a period of 12 months or less, and tax periods exceeding one month to make monthly payments on account. As some businesses may be required to account for output tax on their purchases as well as on the onward sale to non-business customers, the reverse charge may have the effect of increasing their net VAT liability.

This can have the effect of bringing them within the scope of POA, or of increasing their monthly payments if they’re already within the regime.

The POA regime has been amended to allow affected businesses to apply to HMRC to exclude the output tax due under the reverse charge from the calculation to establish if a business is subject to POA or the monthly payments a business in POA has to make. Businesses applying for such exclusion should write to:

Payments On Accounts Team
Business, Tax and Customs
India Buildings
31 Water Street
Liverpool
L2 0RD

Some businesses may find that their net liability will decrease under the reverse charge; for these businesses, the normal rules outlined in the VAT payments on account guidance apply.