Glass building

Delay of VAT domestic reverse charge rules for construction services

Olivia Larson, Executive, VAT
09/06/2020
Glass building

Why the delay?

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. The implementation has now been further delayed to 1 March 2021 to give businesses more time to prepare.

The reverse charge is an anti-fraud measure intended to stop tax evasion in the subcontractor supply chain for construction services. It requires the UK customer receiving the specified supply of construction services to self-account for the VAT due to HMRC instead of the UK supplier. The new rules will impact all businesses that are registered for VAT in the construction sector and may also impact those receiving construction services.

What should you do now?

HMRC have prompted businesses to prepare for the 1 March 2021 introduction date by:

  • checking whether the reverse charge affects either their sales, purchases or both
  • making sure accounting systems and software are updated to deal with the reverse charge
  • considering whether the change will have an impact on cashflow
  • making sure all staff who are responsible for VAT accounting are familiar with the reverse charge and how it will operate

Additionally, HMRC are making an amendment to the original legislation from April 2019, that businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, must inform their sub-contractors in writing that they are end users or intermediary suppliers.

For more information, please view the brief on HMRC’s website.

If you would like to discuss how the VAT domestic reverse charge rules for construction services affect you and what you need to do to ensure you are compliant by 1 March 2021, please contact Robert Marchant or your usual Crowe contact.

Contact

Robert Marchant
Robert Marchant
Partner, VAT and Customs Duty services
London