Introduction of VAT domestic reverse charge for construction services delayed
09 June 2020
HMRC has confirmed that the planned introduction of the VAT domestic reverse charge for construction services has been delayed further from 1 October 2020 to 1 March 2021, due to the impact that coronavirus has had on the construction sector.
The change was initially due to be implemented from 1 October 2019 but was deferred for a period of 12 months, as industry bodies expressed their concerns around the lack of preparation and therefore, the potential negative impact on businesses.
There has also been an amendment to original legislation, laid in April 2019, which means that it is mandatory for businesses who are excluded from the reverse charge because they are end users or intermediary suppliers to inform their sub-contractors in writing of this fact. The rationale behind this is to ensure that both parties are aware whether the supply is excluded from the reverse charge.
The new rules relating to the domestic reverse charge mean that UK customers who get supplies of construction services must account for the VAT due on these supplies within their VAT return, and pay the VAT owed straight to HMRC, as opposed to the UK supplier. This will prevent criminals from stealing the VAT that is due to HMRC and it is hoped that the changes will work to significantly reduce fraud in the sector.
HMRC will update reverse charge guidance to accommodate the change to the implementation date and also the requirement for end users and intermediary suppliers to inform suppliers where they want to be excluded from the reverse charge.
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