Construction Industry Reverse Charge Delayed Again Until March 21


Revenue and Customs Brief 7 (2020): domestic reverse charge VAT for construction services - delay in implementation

The VAT Reverse Charge has been further delayed by 5 months until the 1st March 2021.

We wrote on the 10th September 2019 that the VAT Reverse Charge that was due to come into force as of October 2019 had been delayed at the last minute until October 2020. It would seem that due to Covid 19 the Government have again discussed the timing and again delayed.

Domestic reverse charge VAT for construction services delay in implementation

Information on the VAT Reverse Charge

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 5 months from 1 October 2020 until 1 March 2021 due to the impact of the coronavirus pandemic on the construction sector.

There will also be an amendment to the original legislation, which was laid in April 2019, 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.

Who should read this brief

Businesses registered for VAT that are in the construction sector.


A domestic reverse charge means the UK customer who gets 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 to allow for the potential cash-flow and administrative impacts the change will have on businesses.

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 domestic reverse charge for building and construction services was originally planned to come into force on 1 October 2019, but this was delayed for a year in response to industry concerns that some businesses were not ready to implement the changes required.

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.

Explanation of the change

To help these businesses overcome the effects that the coronavirus pandemic has had on them and give them more time to prepare, the introduction of the reverse charge has been delayed for a period of 5 months until 1 March 2021.

The intervening period

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

In the intervening period, HMRC will continue to 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.

The additional amendment to require end users and intermediary suppliers to notify their sub-contractors of their end user or intermediary supplier status in writing is designed to make sure both parties are clear whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance and brings certainty for sub-contractors as to the correct treatment for their supplies. If followed, it will remove a concern that HMRC may seek to challenge the reverse charge treatment where a business that qualified as an end user or intermediary supplier had not given any notification of their status.

More information

HMRC will update the reverse charge guidance to reflect the change in the implementation date and the need for end users and intermediary suppliers to inform suppliers where they want to be excluded from the reverse charge .

For more information about this announcement email:

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