The government has announced that the introduction of the domestic reverse charge for construction services will be delayed for a period of 12 months until 1 October 2020.
WHAT IS THE REVERSE CHARGE?
A domestic reverse charge means the UK customer who gets supplies of construction services must account for the VAT due on these supplies on their VAT return rather than the UK supplier. 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.
WHY IS IT DELAYED?
The announcement on GOV.UK explains that industry representatives had “raised concerns” that many construction sector businesses were not ready to implement the changes on the original date of 1 October 2019. To help them prepare, and to avoid the new rules kicking in at the same time as the UK’s potential exit from the European Union, the reverse charge has been delayed for 12 months until 1 October 2020.
HMRC PLANS FOR ITS IMPLEMENTATION IN 2020
In the intervening year, HMRC will focus additional resources on identifying and tackling existing perpetrators of the fraud. It will also work closely with the sector to raise awareness and provide additional guidance and support to make sure all businesses will be ready for the new implementation date.