New rules were supposed to apply to construction businesses that buy and sell services as part of a larger supply chain from October 2019. However, these were delayed twice. What’s the latest?
The new reverse charge for builders is aimed at preventing “missing trader” VAT fraud in the construction industry. This is where a contractor charges another business output tax, but then disappears without making good the tax to HMRC. The new rules will mean that builders no longer charge VAT on invoices they issue to other VAT-registered construction industry customers. The customer will instead declare the VAT on their own returns and claim input tax as well, i.e. a self-accounting entry. As VAT is not being paid to builders, they cannot disappear and deprive HMRC of the tax in question.
The rules were supposed to come into force on 1 October 2019, but were delayed by twelve months in order to give businesses more time to prepare. It was then delayed for a further five months due to the pressures cause by coronavirus during 2020. Following the UK going into a third national lockdown, some expected a further delay to be announced. However, the government has confirmed that the changes will indeed come into effect from 1 March 2021.
All VAT-registered businesses in the construction industry will need to consider whether the new rules apply to their supplies from that date. Use HMRC’s updated guidance here if you need to do this.
What to do next
For further information on this and other topics contact Tony on 07974-418819 or email at tonymiles20@gmail.com or through the contact page of the website http://www.milestone-solutions.co.uk
