Muras Matters: VAT Reverse Charge for Building and Construction Services – Delayed until 2020

As featured in Muras Matters at the end of July, new VAT rules were due to be introduced for construction services with effect from 1 October 2019, requiring a VAT reverse charge on certain services to apply from that date. This would be a major change in the way VAT is collected in the industry.

However, following concerns being raised within the sector regarding the implementation date, HM Revenue & Customs (HMRC) announced on Friday that there would be a 12 month delay to the introduction of these rules until 1 October 2020.

Industry representatives had called upon the government to delay the start date, raising concerns that some businesses in the construction sector were not ready for the change and warning of potential ‘chaos’. HMRC has taken this on board and the 12 month delay will allow businesses more time to prepare and to also avoid the changes coinciding with Brexit.

HMRC has stated that they remain committed to the introduction of the reverse charge, and during the next 12 months they will focus additional resources on identifying and tackling fraud in the construction sector. They will also work closely with the sector to raise awareness and provide additional guidance and support to ensure all businesses will be ready for the new implementation date.

HMRC has also said that it recognises that some businesses will already have changed their invoices to meet the needs of the reverse charge and cannot easily change them back in time. Where genuine errors have occurred, HMRC will take into account the fact that the implementation date has changed.

Additionally some businesses may have opted for monthly VAT returns ahead of the original 1 October 2019 start date. This can be reversed by using the appropriate stagger option on the HMRC website.

If you have any concerns over the new VAT rules or would like further information in regard to these VAT changes, please contact our Tax Director, Jenny Marks.

To see our other news items please visit our Muras Baker Jones – Blog.