construction.vat-reverse-charge

export function domesticReverseCharge(supply: ReverseChargeSupply): ReverseChargeDecision

export type VatCategory = "standard" | "reduced" | "zero" | "exempt";

export type ReverseChargeReason = "reverse-charge" | "before-start" | "supplier-not-vat-registered" | "customer-not-vat-registered" | "not-reported-under-cis" | "not-standard-or-reduced" | "employment-business" | "end-user-notified" | "five-percent-disregard";

/** The facts about one supply of construction services that decide its VAT treatment. */
export interface ReverseChargeSupply {
  /** tax point of the supply */
  readonly supplyDate: string;
  /** the supplier is VAT registered in the UK */
  readonly supplierVatRegistered: boolean;
  /** the customer is VAT registered in the UK */
  readonly customerVatRegistered: boolean;
  /** payment for the supply is reported within the Construction Industry Scheme */
  readonly reportedUnderCis: boolean;
  /** the rate the supply would bear under normal rules */
  readonly vatCategory: VatCategory;
  /** the supplier is an employment business supplying staff or workers */
  readonly employmentBusiness: boolean;
  /** the customer has told the supplier in writing it is an end user or intermediary supplier */
  readonly endUserNotified: boolean;
  /** contracted value of the reverse charge services as a share of the whole supply; 10000 when all of it */
  readonly reverseChargeShareBasisPoints: number;
}

/** The treatment, why, and what the invoice must say. */
export interface ReverseChargeDecision {
  readonly applies: boolean;
  readonly reason: ReverseChargeReason;
  /** the note the invoice must carry when the reverse charge applies; null otherwise */
  readonly invoiceWording: string | null;
}

import { domesticReverseCharge } from "#fune/construction.vat-reverse-charge@^1";

import { REVERSE_CHARGE_RULES, REVERSE_CHARGE_RULES_HISTORY, REVERSE_CHARGE_RULES_HORIZON } from "./construction_vat_reverse_charge_data.ts";  ← this capability’s own data, compiled from data/reverse-charge.json into the same file by fune build
import { type ReverseChargeDecision, type ReverseChargeReason, type ReverseChargeSupply } from "./construction_vat_reverse_charge_types.ts";

const ISO_DATE = /^\d{4}-\d{2}-\d{2}$/;

function notApplied(reason: ReverseChargeReason): ReverseChargeDecision {
  return { applies: false, reason, invoiceWording: null };
}

/**
 * Whether the UK VAT domestic reverse charge for building and construction
 * services (VATA 1994 s.55A) applies to one supply.
 *
 * The conditions are checked in a fixed order and the first that fails is the
 * reason, so the answer is the same in every language and explains itself.
 */
export function domesticReverseCharge(supply: ReverseChargeSupply): ReverseChargeDecision {
  if (typeof supply.supplyDate !== "string" || !ISO_DATE.test(supply.supplyDate)) {
    throw new RangeError(`supplyDate must be an ISO date (YYYY-MM-DD), received "${supply.supplyDate}"`);
  }
  const share = supply.reverseChargeShareBasisPoints;
  if (!Number.isInteger(share)) {
    throw new TypeError(`reverseChargeShareBasisPoints must be an integer, received ${share}`);
  }
  if (share < 0 || share > 10000) {
    throw new RangeError(`reverseChargeShareBasisPoints must be between 0 and 10000, received ${share}`);
  }
  if (!["standard", "reduced", "zero", "exempt"].includes(supply.vatCategory)) {
    throw new RangeError(`unknown vatCategory "${supply.vatCategory}": expected standard, reduced, zero or exempt`);
  }

  const date = supply.supplyDate;
  let rule: (typeof REVERSE_CHARGE_RULES)[number] | null = null;
  for (const row of REVERSE_CHARGE_RULES) {
    if (row.jurisdiction !== "GB" || date < row.validFrom) continue;
    if (row.validTo !== null && date > row.validTo) continue;
    if (rule === null || row.validFrom > rule.validFrom) rule = row;
  }
  if (rule === null) {
    // A pruned build must not answer "before the reverse charge started" for a
    // date it simply no longer carries rules for.
    if (REVERSE_CHARGE_RULES_HORIZON !== null && date < REVERSE_CHARGE_RULES_HORIZON) {
      throw new RangeError(
        `no reverse charge rule for ${date}: this build was installed with history=${REVERSE_CHARGE_RULES_HISTORY}, ` +
          `so it only carries rules from ${REVERSE_CHARGE_RULES_HORIZON}. Reinstall with history=full.`
      );
    }
    return notApplied("before-start");
  }

  if (!supply.supplierVatRegistered) return notApplied("supplier-not-vat-registered");
  if (!supply.customerVatRegistered) return notApplied("customer-not-vat-registered");
  if (!supply.reportedUnderCis) return notApplied("not-reported-under-cis");
  if (supply.vatCategory !== "standard" && supply.vatCategory !== "reduced") return notApplied("not-standard-or-reduced");
  if (supply.employmentBusiness) return notApplied("employment-business");
  if (supply.endUserNotified) return notApplied("end-user-notified");
  if (share <= rule.disregardBasisPoints) return notApplied("five-percent-disregard");
  return { applies: true, reason: "reverse-charge", invoiceWording: rule.invoiceWording };
}

Install

fune build

With that line in your source, in a TypeScript project (language typescript in fune.project), fune build resolves it and nothing else, pins them in fune.lock, downloads only the TypeScript package of each, and builds the code above into your project’s .fune/build, one readable file per capability with a header linking back here. Or pin a range in fune.project and build in one step:

fune add construction.vat-reverse-charge

The manifest, vectors and README with only the TypeScript implementation. Install it without the registry with fune add ./construction.vat-reverse-charge-1.0.2-typescript.fune, or fetch it from a terminal with fune pull construction.vat-reverse-charge@1.0.2:typescript.

The whole function, every language, is one file too: construction.vat-reverse-charge-1.0.2.fune, 35,697 bytes, sha256 da27d1183c7730bec44c1eddb84b28ee0e321a5d184e5d382e7eca4805b2fab4. It installs into a project of any language.

// fune: before construction.vat-reverse-charge

// fune: after construction.vat-reverse-charge

// fune: step construction.vat-reverse-charge after <n|label>

More from the author

The first condition that fails becomes the `reason`, so every answer explains itself and the three languages agree on which reason wins:

| reason | the reverse charge does not apply because | |---|---| | `before-start` | the tax point is before 1 March 2021 | | `supplier-not-vat-registered` | the supplier is not UK VAT registered (and charges no VAT at all) | | `customer-not-vat-registered` | the customer is not UK VAT registered, e.g. a householder | | `not-reported-under-cis` | the payment is not reported within the Construction Industry Scheme | | `not-standard-or-reduced` | the supply is zero-rated or exempt | | `employment-business` | the supplier is an employment business supplying staff or workers | | `end-user-notified` | the customer has said in writing that it is an end user or intermediary supplier | | `five-percent-disregard` | the reverse charge services are 5% or less of the whole supply | | `reverse-charge` | none of the above: it applies (`applies` is true) |

**End users and intermediary suppliers.** Being one only changes anything once the customer has told the supplier **in writing**. Until then HMRC says the supplier must still apply the reverse charge. An intermediary supplier is connected or linked to the end user, either with a relevant interest in the same land (landlord and tenant) or as part of the same corporate group (Companies Act 2006 s.1161). It gives the same kind of written notice, so both cases are the one `endUserNotified` flag rather than a separate connected-party input.

**The 5% disregard** is judged on the contracted values agreed at the start of the contract, not invoice by invoice. Pass that share as `reverseChargeShareBasisPoints` (10000 when the whole supply is construction services). The guide says "5% or less", so exactly 500 is disregarded, and normal VAT rules then apply to the whole supply. When the predominant element is zero-rated, the supply is not standard or reduced-rated in the first place, so `not-standard-or-reduced` is reported.

## Invoice wording

When the reverse charge applies, `invoiceWording` is "Reverse charge: customer to pay the VAT to HMRC. S55A VATA 94 applies." The VAT Regulations 1995 require the reference "reverse charge", and the other two phrases are HMRC's own examples ("Customer to pay the VAT to HMRC", "S55A VATA 94 applies"). The invoice must also show the VAT due under the reverse charge (or the rate, if the amount cannot be shown) without adding it to the amount charged. That is for the invoice itself; `finance.tax.add-vat` gives the amount.

The start date, the 5% threshold and the wording are dated data in `data/reverse-charge.json`. A `history=current` build refuses a date before its horizon rather than calling it `before-start`.

## Not covered

Credit notes spanning the March 2021 change, the transitional scaffolding rules, and whether a service is within CIS at all (that is the caller's `reportedUnderCis`). The CIS deduction itself is `construction.cis-deduction`.

## Sources

- HMRC, "VAT reverse charge technical guide": https://www.gov.uk/guidance/vat-reverse-charge-technical-guide (start date 1 March 2021, end users and intermediary suppliers, employment businesses, the 5% disregard, invoice wording). - HMRC, "How to use the VAT reverse charge if you supply building and construction services": https://www.gov.uk/guidance/how-to-use-the-vat-reverse-charge-if-you-supply-building-and-construction-services (the list of conditions). - HMRC, "VAT domestic reverse charge for building and construction services": https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services

1.0.1 fixes Python accepting a trailing newline or non-ASCII digits in supplyDate; adds tests.

## Notices

Contains public sector information licensed under the Open Government Licence v3.0 (https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/).

1.0.2 adds its attribution notices (NOTICE). The code and the tests are unchanged.

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