vat on Purchase of Construction Services both inside and outside the State

The new VAT rules for Construction Services (Reverse Charge System) applies to principal contractors (NUI, Galway) and sub-contractors involved in construction operations to which Relevant Contracts Tax (RCT) applies effective from 1^st September 2008.

The invoice from the supplier should not charge VAT, and must contain the statement “ VAT ON THIS SUPPLY TO BE ACCOUNTED FOR BY THE PRINCIPAL CONTRACTOR”. Application of the correct tax code (T1, T2, T3, or T4) to relevant documents is essential, and the tax code should be provided by the purchaser, not by accounts office personnel.

Regular ’Departmental Expenditure’ - Non Reclaimable vat

• T1           Vat needs to be added13.5% ( Low Rate)
• T2           Vat needs to be added 23% ( Standard Rate) 

Certain ’Vatable Research contracts - Reclaimable vat

• T3           Vat needs to be added13.5% ( Low Rate)
• T4           Vat needs to be added23% ( Standard Rate)

When keying in Purchase Orders, the amount entered is the VAT EXCLUSIVE value, and by entering the above codes, the system calculates the vat as appropriate.

Additional information on new VAT rules for Construction Services is available on http://www.revenue.ie/.

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