Domestic reverse charge (DRC)
This will affect contractors and subcontractors in the construction industry and will apply from the 1st March 2021. It will apply if the subcontractor and contractor are VAT registered but will NOT apply if the work you do is zero rated.
You will need to contact the contractor and find out if they are the end customer. If not, then the DRC VAT rules will apply and you do not have to show VAT on your invoice. Instead, you should state ‘This is a domestic reverse charge invoice’. If you do show the VAT then it should be as a footnote with the same wording. The contractor will not pay you the VAT element.
When entering your invoice in your VAT return you should show it as a reverse charge meaning the net sales amount goes in box 6 of your VAT return.
You must tell the subcontractor if you are the end user or whether you are working for the end customer. If a subcontractor sends you an invoice with the total including VAT after the 1st March 2021 and you are not the end customer then you should return the invoice. You should inform the subcontractor that you are not the end customer and that the DRC rules apply. The subcontractor should then follow the above regarding his invoice.
When the contractor enters the invoice on the VAT return it should be shown as a reverse charge invoice and the notional VAT amount will go into box 1 and box 4 on the VAT return. The value of the purchase goes in box 7.
Detailed rules can be found here https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services