HMRC delays
VAT reverse charge on construction services
HMRC has
announced a five-month delay to the introduction of the domestic VAT reverse
charge for construction services, due to the impact of the coronavirus (COVID-19)
pandemic on the sector.
The change will
now apply from 1 March 2021 and will overhaul the way VAT is payable on
building and construction invoices as part of a move to reduce fraud in the
sector. Under the domestic reverse charge, the customer receiving the service
will have to pay the VAT owed straight to HMRC instead of paying the supplier,
if they report via the Construction Industry Scheme (CIS).
The change was
originally scheduled to come into effect from 1 October 2019 but was deferred
for 12 months after industry bodies highlighted concerns about the lack of
preparation and the impact on businesses. The start date has now been put back
from 1 October 2020 to 1 March 2021.
There will also
be an amendment to the original legislation. This will 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 subcontractors, in
writing, that they are end users or intermediary suppliers.
HMRC said the
additional amendment is designed to make sure both parties are clear in regard
to whether the supply is excluded from the reverse charge. It reflects
recommended advice published in HMRC guidance and brings certainty for
subcontractors as to the correct treatment for their supplies.
HMRC stated
that it will continue to focus additional resources on identifying and tackling
existing perpetrators of fraud in the construction supply chain. It will also
work closely with the sector to raise awareness and provide additional guidance
and support to ensure all businesses will be ready for the new implementation
date.