
The extension is intended to provide greater certainty for employers, allowing a degree of planning for the future. … Read more
Barbara Bento shows why HMRC's information it receives is only powerful if it is accurate. … Read more
Join our webinar to find out what HMRC are looking for and how to strengthen your claim. … Read more
130 Wood Street, London, EC2V 6DL
enquiries@buzzacott.co.uk T +44 (0)20 7556 1200
The domestic reverse charge (referred to as the reverse charge) is a major change to the way VAT is collected in the building and construction industry, which means the customer receiving the service will be required to pay the VAT due to HMRC, instead of paying the supplier.
It will apply to individuals or businesses registered for VAT in the UK, but not to services supplied to consumers, nor to certain customers who are “end users” or “intermediary” suppliers, where the usual VAT rules apply. The reverse charge will only affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).
A coalition of construction industry representatives had raised concerns that many businesses in the construction sector would not be ready to implement the VAT domestic reverse charge by 1 October 2019, due to the effect of the virus on activity and cash flow. The reverse charge itself will also negatively affect cash flow, because VAT will no longer be collected by suppliers and paid to HMRC at a later date. In addition, many construction businesses have restricted capacity to implement the necessary software and accounting changes due to furloughed staff.
To help the sector and allow more time to prepare, the introduction of the reverse charge has been delayed for a further 5 months until 1 March 2021.
Click here to see Linda's comments on the extension, published by The Chartered Institute of Taxation.
HMRC Business Brief 7 (2020) explains the delay and also that there will be an amendment to the legislation.
This amendment will make it a requirement that in order for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing. This will make it clear whether a supply is excluded from the reverse charge, and therefore which party is responsible for paying VAT to HMRC.
The legislative change will bring certainty for contractors, and had been lobbied for by many commentators because of the potential for disputes where a contractor applied the reverse charge but the customer had failed to declare end user/intermediary status. The HMRC guidance on the reverse charge is here.
The domestic reverse charge (referred to as the reverse charge) is a major change to the way VAT is collected in the building and construction industry, which means the customer receiving the service will be required to pay the VAT due to HMRC, instead of paying the supplier.
It will apply to individuals or businesses registered for VAT in the UK, but not to services supplied to consumers, nor to certain customers who are “end users” or “intermediary” suppliers, where the usual VAT rules apply. The reverse charge will only affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).
A coalition of construction industry representatives had raised concerns that many businesses in the construction sector would not be ready to implement the VAT domestic reverse charge by 1 October 2019, due to the effect of the virus on activity and cash flow. The reverse charge itself will also negatively affect cash flow, because VAT will no longer be collected by suppliers and paid to HMRC at a later date. In addition, many construction businesses have restricted capacity to implement the necessary software and accounting changes due to furloughed staff.
To help the sector and allow more time to prepare, the introduction of the reverse charge has been delayed for a further 5 months until 1 March 2021.
Click here to see Linda's comments on the extension, published by The Chartered Institute of Taxation.
HMRC Business Brief 7 (2020) explains the delay and also that there will be an amendment to the legislation.
This amendment will make it a requirement that in order for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing. This will make it clear whether a supply is excluded from the reverse charge, and therefore which party is responsible for paying VAT to HMRC.
The legislative change will bring certainty for contractors, and had been lobbied for by many commentators because of the potential for disputes where a contractor applied the reverse charge but the customer had failed to declare end user/intermediary status. The HMRC guidance on the reverse charge is here.
For more information on the above or for VAT advice tailored to your organisation, please get in touch with Linda Skilbeck or fill out the form below.
We use necessary cookies to make our site work. We’d also like to set optional analytics and marketing cookies. We won't set these cookies unless you choose to turn these cookies on. Using this tool will also set a cookie on your device to remember your preferences.
For more information about the cookies we use, see our Cookies page.
Please be aware:
— If you delete all your cookies you will have to update your preferences with us again.
— If you use a different device or browser you will have to tell us your preferences again.
Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.
Analytics cookies help us to understand how visitors interact with our website by collecting and reporting information anonymously.
Marketing cookies are used to track visitors across websites. The intention is to display ads that are relevant and engaging for the individual user and thereby more valuable for publishers and third party advertisers.