UK HMRC delays construction VAT domestic reverse charge till Oct 2020
- Sep 6, 2019 | Richard Asquith
The UK has postponed plans to introduce the domestic reverse charge on VAT in the construction services industry. The measure, which effectively takes the cash payment out of B2B transactions, is aimed at reducing VAT fraud. It had been scheduled for introduction on 1 October 2019. It will now be rolled out in October 2020.
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.
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