VAT: domestic reverse charge for construction services - delay in implementation

HMRC has issued Revenue and Customs Brief 10 (2019) to announce that the introduction of the domestic reverse charge for construction services will be delayed for a period of 12 months until 1 October 2020.

It has become clear that many businesses in the construction sector are not ready to implement the VAT domestic reverse charge for building and construction on 1 October 2019. This should also avoid the changes coinciding with Brexit.

HMRC has stated that it remains committed to the introduction of the reverse charge and has already increased compliance resource. It has put in place a robust compliance strategy for tackling fraud in the construction sector using “tried and tested compliance tools”.

In the intervening year, HMRC will focus additional resource 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.

HMRC recognises that some businesses will have already 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.

Some businesses may have opted for monthly VAT returns ahead of the 1 October 2019 implementation date which they can reverse by using the appropriate stagger option on the HMRC website.

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