HMRC has announced that the introduction of the domestic reverse charge for construction services will be delayed until 1 March 2021 due to the impact of the coronavirus pandemic. What do you need to know?
What is the reverse charge? Rules are being introduced to tackle VAT fraud within the construction industry. The reverse charge means that the customer who gets supplies of construction services must account for the VAT due on these supplies on their VAT return, rather than the supplier.
What’s changed?
The new rules were due to take effect on 1 October 2020 but have now been put back until 1 March 2021 due to the coronavirus pandemic. Businesses are already facing cash-flow difficulties and introducing the reverse charge as planned would only increase the pressure as they will no longer receive VAT payments from customers for some services. The delay will also give businesses more time to prepare and HMRC intends to use the extra time to educate the construction sector on these changes.
Are there any other updates?
There will also be an amendment to the original legislation, 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 subcontractors in writing. This should make it easier for suppliers to identify which services are excluded from the reverse charge.
HMRC guidance on the reverse charge can be found here.
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