Welcome news for the construction industry as HMRC delays the implementation of ‘reverse charge’ VAT accounting for 12 months
HMRC has announced that the introduction of significant amendments to the VAT rules for construction services, known as ‘domestic reverse charge’ accounting, have been delayed for 12 months until 1 October 2020. This comes after it released updated guidance in June for those who were going to be affected by the changes.
The introduction of the domestic reverse charge has been delayed due to concerns raised by industry representatives. Those in the construction industry indicated that some businesses would not be ready to implement the changes this year. The decision to delay the new procedure was taken to help these businesses and allow them greater time to make preparations, and it also means that the changes will not coincide with uncertainty involving Brexit.
The new rules were previously due to be implemented in less than 4 weeks’ time. Under the change, the rate of VAT on construction services will not be affected, but accountability would to the customer (in certain circumstances). A domestic reverse charge means that the UK customer receiving the service pays the VAT that is due directly to HMRC, instead of the supplier. The purpose of the amendment is to reduce the level of money lost to fraud; at present, HMRC estimates that losses of over £100m per annum through VAT fraud.
To find out more information on how the delayed 2020 introduction might affect you, please read our previous article here. It also contains a flow chart detailing whether you need to apply normal rules, or apply the domestic reverse charge. Read more about HMRCs decision to delay the implementation here.
If you would like further guidance on this topic, please do not hesitate to contact one of our dedicated VAT specialists: Mark Hetherington, VAT Partner, on 0191 243 6073 or at email@example.com; or Ian Coulthard, VAT Senior Manager, on 0191 243 6017 or at firstname.lastname@example.org.
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