On an Irish valuation, who accounts for the VAT is the whole question

Every payment claim carries two numbers that matter for tax: the net value of the work and the VAT on it. On most construction jobs in Ireland the surprise is that the payee does not add the VAT at all. The recipient does, under the reverse charge, and getting that wrong on a claim causes trouble that has nothing to do with the value of the work.

The standard rate

The standard rate of VAT in the State is twenty three per cent. That is the rate that sits behind a construction valuation. Net is the value of the work. Gross, where VAT is charged in the ordinary way, is the net plus VAT at that standard rate of twenty three per cent. So far this is the same net and gross a surveyor works with anywhere.

The reverse charge changes who pays it over

Construction services supplied between two accountable persons are subject to the VAT reverse charge. The supplier does not charge VAT on the invoice. Instead the recipient accounts for the VAT to Revenue, and where entitled recovers it, so the tax nets to nil in cash terms for a fully taxable recipient. This is tied to the Relevant Contracts Tax system, RCT, which governs payments between principals and subcontractors in construction.

• Net stays net. The value of the work is unchanged, whoever accounts for the VAT.
• The supplier does not charge it. Where the reverse charge applies, no VAT is added to the payment claim by the payee.
• The recipient accounts for it. The recipient self accounts for VAT at the standard rate of twenty three per cent and recovers it where entitled.

Why it matters on the claim

A payee who charges twenty three per cent on a supply that should have been reverse charged has invoiced VAT that should never have been on the document. A payee who omits VAT where it should have been charged has understated the gross. Neither error affects the value of the work, but both cause a mismatch with Revenue and a delay in payment while the paperwork is corrected. The claim has to state the correct treatment for the correct parties.

The discipline

Confirm the VAT status of both parties before the first claim. Where both are accountable persons and the supply is construction services, apply the reverse charge and claim net. Where VAT is charged in the ordinary way, apply the standard rate of twenty three per cent to reach gross. Carry both net and gross on every claim so the position is never in doubt. Tax questions belong with a qualified adviser, but the surveyor is the one who has to get the number on the claim right.