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Updates from the Clayton & Brewill team.

Domestic reverse VAT charge for construction on hold until 2021

16th June, 2020

The introduction of reverse charge VAT on construction services, which has already been pushed back to 1 October 2020, will now be introduced on 1 March 2021.

The antifraud measure aims to eliminate the risk of a fraudulent supplier invoicing for work that it has allegedly supplied together with VAT, which it then fails to account for to HMRC. As such, it will put an end to subcontractors receiving VAT payments in most situations, which will likely have an impact on cashflow for businesses in the short term.

reverse charge VATWith many construction projects came to a halt as a result of the coronavirus pandemic, introducing the changes from October would have come at a difficult time for the sector. The government has therefore taken the decision to delay the measure.

As well as the delay, HMRC also announced an amendment to the policy, which requires end users and intermediary suppliers to notify their sub-contractors of their end-user or intermediary supplier status in writing. This amendment is designed to make sure both parties are clear whether the supply is excluded from the reverse charge.

How you can prepare for the domestic reverse charge

There are a number of recommended ways in which you can prepare for the reverse charge:

  • check whether the reverse charge affects either your sales, purchases or both
  • make sure your accounting systems and software are updated to deal with the reverse charge
  • consider whether the change will have an impact on your cashflow
  • make sure all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will operate

If you want to discuss the reverse charge in more detail, please contact our friendly team here or call us on 0115 950 3044.

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