Revenue and Customs Brief 10 (2019) - domestic reverse charge VAT for construction services
Submit Articles Back to Articles
Published 6 September 2019
Domestic reverse charge VAT for construction services - delay in
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.
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
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:
About the Author
© Crown Copyright 2019.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2019-09-06 23:43:00 in Tax Articles