VAT Reverse Charge – Construction Services
Posted on 1st May 2020 at 14:26
Due to the impact of the COVID-19 pandemic, HMRC have announced a delay of five months to the introduction of the domestic reverse charge for the construction sector. The VAT change will now not apply until 1st March 2021.
The change was scheduled originally to come into effect from 1 October 2019, it was however then deferred for twelve months following industry bodies having highlighted their concerns about lack of preparation and also the impact it would have on businesses.
The new rules would mean a complete overhaul on the way VAT is payable on building and construction invoices. Under the domestic reverse charge, the actual customer receiving the service would have to pay the VAT owed directly to HMRC instead of paying the supplier, as per reporting under the CIS (Construction Industry Scheme). The purpose of the implementation of the VAT Reverse Charge is in a move to reduce fraud in the sector.
An amendment to the original legislation has been added – To make it a requirement that for businesses to be excluded from the reverse charge (because they are end users or intermediary suppliers), they must inform their sub-contractors in writing that they are end users or intermediary suppliers.
HMRC have added, that they intend to work closely with the sector to raise awareness and they will provide additional support and guidance to make sure all businesses will be ready for the new implementation date of 1st March 2021.
How to prepare:
Check whether the reverse charge affects either your sales, purchases (or both)
Make sure your accounting systems/software are updated to deal with the reverse charge
Consider whether the change will have an impact on your cashflow
Make sure all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will operate
For help and advice, please call us on 0121 550 8509 or alternatively email firstname.lastname@example.org. Additional information can also be found on the government website CLICK HERE
Tagged as: VAT
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