HMRC has announced a five-month-delay to the introduction of the domestic reverse charge for construction services, due to the impact of the coronavirus pandemic on the construction sector, and the VAT change will not now apply until March 2021
The new rules mark a complete overhaul of the way VAT is payable on building and construction invoices, as part of moves to reduce fraud in the sector. Under the domestic reverse charge the customer receiving the service will have to pay the VAT owed straight to HMRC instead of paying the supplier if they report under the Construction Industry Scheme (CIS).
The change was originally scheduled to come into effect from 1 October 2019, but was then deferred for 12 months, after industry bodies and accounting specialists highlighted concerns about lack of preparation and the impact on businesses.
Now the start date has been put back from 1 October 2020 to 1 March 2021.
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.
HMRC says the additional amendment is designed to make sure both parties are clear whether the supply is excluded from the reverse charge.
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As always, if you need any further guidance on this or any of the other support measures available to businesses affected by the coronavirus pandemic, please contact your usual Moore adviser.