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The principal contractor accounts for the VAT on services rendered from a sub-contractor under what is known as the Reverse Charge.

1. The charge for services by the sub-contractor does not include VAT on the services.

2. The VAT registered sub-contractor issues an invoice to the principal, which shows all the information as it appears on a VAT invoice except the VAT rate and VAT amount. The invoice should include the VAT registration number of the sub-contractor.

3. The invoice should also contain the statement ‘VAT ON THIS SUPPLY TO BE ACCOUNTED FOR BY THE PRINCIPAL CONTRACTOR’

4. The principal contractor pays the sub-contractor for the services. This payment should not include VAT.

5. If RCT is to be deducted, it should be calculated on the VAT-exclusive amount.

6. The principal contractor should include the VAT on the services received from the sub-contractor in the VAT return for the period in which the VAT supply in made as VAT on Sales (T1).

7. In the case of a payment being made in advance of supply , the principal will include the VAT on the payment  in the VAT return for the period in which the payment is made.

8. Schools would not be entitled to VAT input credit.