UK delays construction VAT reverse charge to March 2021
- Jun 6, 2020 | Richard Asquith
The UK has again delayed the introduction of the domestic reverse charge for the construction sector. The policy, which eliminates the cash-element of B2B payments, is aimed at reducing VAT fraud. This latest delay from 1 October 2020 to 1 March 2021 is due to the economic effects of the COVID-19 crisis.
The change in accounting for VAT will affect about 120,000 businesses. The delay is a result of a lack of awareness of the new nil-rating rules, and likely disputes on VAT liabilities. In a recent survey undertaken by the Federation of Master Builders, 69% of construction SMEs were found to have not even heard of the new reverse charge.
Under the reverse charge, VAT registered businesses, which supply certain construction services to another VAT-registered business for onward sale, will not be required to account for VAT, but must issue an invoice stating that the service is subject to the domestic reverse charge.
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 certificates.