blog header image

Posted : 10 Sep 2019 at 15:38:22
Category: Important Announcement

Share this article

Revenue and Customs Brief 10 (2019): domestic reverse charge VAT for construction services - delay in implementation

1. Purpose of this brief

This brief explains that the introduction of the domestic reverse charge for construction services will be delayed for a period of 12 months until 1 October 2020.

2. Who should read this brief

Businesses registered for VAT that are in the construction sector.

3. Background

A domestic reverse charge means the UK customer who get supplies of construction services must account for the VAT due on these supplies on their VAT return rather than the UK supplier.

This removes the scope for fraudsters to steal the VAT due to HMRC and follows similar measures introduced in response to criminal threats for mobile telephones, computer chips, emissions allowances, gas and electricity, telecommunication services and renewable energy certificates.

There has been a long lead-in time ahead of the anti-fraud measure coming into force. The Government first confirmed it would be taking this measure forward at Autumn Budget 2017. A technical consultation on the draft legislation and its impact took place in summer 2018 and the final legislation and guidance were published in November 2018.

The long lead-in time was to allow for potential cash-flow and administrative impacts the change could have on businesses.

Businesses need to adapt their accounting systems for dealing with VAT and there will be a negative impact on the cash-flows for many affected businesses, as they will no longer get VAT payments from customers for services where the reverse charge applies.

4. Explanation of the change

Industry representatives have raised concerns that some businesses in the construction sector are not ready to implement the VAT domestic reverse charge for building and construction on 1 October 2019.

To help these businesses and give them more time to prepare, the introduction of the reverse charge has been delayed for a period of 12 months until 1 October 2020. This will also avoid the changes coinciding with Brexit.

5. The intervening year

HMRC remains committed to the introduction of the reverse charge and has already increased compliance resource. It has put in place a robust compliance strategy for tackling fraud in the construction sector using tried and tested compliance tools.

In the intervening year, HMRC will focus additional resource on identifying and tackling existing perpetrators of the fraud. It will also work closely with the sector to raise awareness and provide additional guidance and support to make sure all businesses will be ready for the new implementation date.

HRMC recognises that some businesses will have already changed their invoices to meet the needs of the reverse charge and cannot easily change them back in time. Where genuine errors have occurred, HMRC will take into account the fact that the implementation date has changed.

Some businesses may have opted for monthly VAT returns ahead of the 1 October 2019 implementation date which they can reverse by using the appropriate stagger option on the HMRC website.

6. Further information

HMRC will update the reverse charge guidance to reflect the change in the implementation date.

For further information about this announcement contact: indirecttax.vatsncfteam@hmrc.gov.uk.

SIMILAR NEWS

blog header image
IMPORTANT ANNOUNCEMENT
SELF-EMPLOYED GIVEN EXTRA MONTH TO FILE TAX RETURN FINE-FREE

HMRC will not levy a late fine on those who file their tax return by 28 February 2021. The deadline to submit a self-assessment tax return is usually 31 January, and late penalties are usually applied ...

blog header image
IMPORTANT ANNOUNCEMENT
RISHI SUNAK SET TO EXTEND FURLOUGH SCHEME PAST APRIL

Rishi Sunak is reportedly set to extend the government’s furlough scheme beyond the end of April in his 3 March Budget. The chancellor is drawing up plans to extend the £82bn scheme into t ...

blog header image
IMPORTANT ANNOUNCEMENT
TORY BACKBENCHERS WARN BORIS JOHNSON TO DROP LOCKDOWN SOON OR FACE LEADERSHIP CHALLENGE

Boris Johnson has been warned by lockdown-sceptic Tory backbenchers that he will face a leadership challenge if he does not “set out a clear plan for when our full freedoms will be restored&rdqu ...

blog header image
IMPORTANT ANNOUNCEMENT
TAX RETURN DEADLINE LOOMS AS 45% STILL NEED TO FILE

Time is ticking for 5.4 million taxpayers who have until 31 January to complete their tax return, as HMRC reports filing rates tracking at a similar level as last year despite Covid disrupti ...

blog header image
IMPORTANT ANNOUNCEMENT
BUILDERS MERCHANTS TO STAY OPEN AND CONSTRUCTION TO CARRY ON!

Building and construction must remain open and domestic construction work can carry on during the latest lockdown which will be in force until at least the middle of February. Boris Johnson made ...

blog header image
IMPORTANT ANNOUNCEMENT
IR35 CHANGES IN APRIL 2021 (AGAIN)

The IR35 changes in the private sector previously scheduled for April 2020, will go ahead on 6 April 2021 The Government has now published the Finance Act which contains the final text of the off-payr ...

business-directory Business Directory
smartbusinessdirectory Payroll Services Business Directory
truebusinessdirectory payroll-services Directory
payroll-services Directory