Construction Reverse Charge on labour supplied
Q: My client is in the construction industry. It supplies labour to building firms, for example brickies, groundworkers, site foremen etc. Sometimes these people are employees of my client, sometimes they are self-employed people. Either way, my client charges its construction customer for the use of these people. My client checks the labourer's experience and qualifications and makes sure they're fit for purpose and go to the correct site at the correct time, but otherwise does not get involved in the work they are actually doing - the customer handles this aspect and is responsible for ensuring the workers know what they need to do on site. As these services are reportable under the Construction Industry Scheme (CIS), I understand this means my client must not charge VAT from 1 March - is that correct?
A: No. The new construction reverse charge only applies to supplies that include "construction services". For VAT purposes, the provision of ‘staff services’ is not a construction service, even though such services might be reportable under the CIS. Here, as your client only provides the workers and does not have day to day direction and control or oversight of the work actually being performed by the workers, they would be seen as supplying ‘staff services’ for VAT purposes (in a similar way to how an employment bureau would supply workers) and therefore should charge VAT in the normal way.