In a further development, due to the impact of Covid-19 on the construction sector, the VAT domestic reverse charge for construction services has been further delayed by 5 months and will now commence on 1 March 2021. This delay also comes with a change requiring contractors to inform their sub-contractors whether or not they are an end user or intermediary suppliers.
Sub-contractors affected by the changes will now have to deal with the cashflow impact of the reverse charge procedure at the same time as their deferred VAT payments will fall due.
We recommend that businesses should fully understand their short and mid-term cashflow. If you want to discuss how this can be achieved, you can contact us.
Original article published on 7 September 2019…
On 6 September 2019, in response to representations from the construction sector, HMRC announced that the proposed implementation of the Domestic Reverse Charge for VAT has been postponed for 12 months and will now be implemented on 1 October 2020.
Some businesses will have already changed their invoices to accommodate the change and these may not be easily reversed. HMRC have confirmed that they will take account of the short notice of this change when considering genuine errors.
Some businesses may have already changed to monthly VAT returns in preparation of the change. This change can be reversed.
HMRC‘s original decision to bring in the charge was to combat VAT fraud and follows similar moves in the mobile phone, computer chips, emissions and energy sectors. Compliance resources have already been increased to tackle the fraud and police the changes.
The is good news for those businesses who were facing cash flow issues from the proposed move. However, they must now act over the next 12 months to be ready for the changes.
If you want to discuss how this change will affect your business contact us.