VAT reverse charge in construction delayed until 1 March 2021
05 June 2020
- The VAT 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.
- Today, 5 June 2020, HMRC have published a policy paper confirming that the reverse charge will now be delayed until 1 March 2021.
- HMRC have stated that the delay is due to the impact of the coronavirus pandemic on the construction sector.
- The original legislation will be amended 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 state that this 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.
See the guidance here which has been updated to reflect the new date.
Aspire Comment
With the stress and financial pressure that the coronavirus pandemic has bought to all sectors, this may be a welcomed delay, but nevertheless frustrating for those who have been making preparations since 2019. Businesses will now have ample time for software providers to ensure their updates are compliant and for sufficient tests to be completed.
It is imperative that the VAT reverse charge stays on the agenda for those to which it applies. Changes may need to be made in terms of processing cashflow, a larger administrative burden and effectively communicating with those in the supply chain, particularly now that planned update to the legislation will involve an obligation to notify sub-contractors in writing that they are end users or intermediary suppliers.
If you require any guidance or training on the VAT reverse charge in construction, please call to speak to one of our advisors on 0121 445 6178 or email enquire@aspirepartnership.co.uk.
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