Covid-19: delay to VAT reverse charge on construction services

HMRC has announced a five-month delay to the introduction of the domestic reverse charge for construction services, due to the impact of the coronavirus pandemic on the construction sector. The VAT change will not now apply until 1 March 2021.

The new rules mark a complete overhaul of the way VAT is payable on building and construction invoices. Under the domestic reverse charge the customer receiving the service will have to pay the VAT owed straight to HMRC instead of paying the supplier if they report under the Construction Industry Scheme (CIS).

The change was originally scheduled to come into effect from 1 October 2019, but was then deferred for 12 months. Now the start date has been put back from 1 October 2020 to 1 March 2021.

There will also be an amendment to the original legislation  to make it a requirement that 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 that they are end users or intermediary suppliers.

HMRC says the additional amendment is designed to make sure both parties are clear whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance and brings certainty for sub-contractors as to the correct treatment for their supplies.

If you have concerns or questions, please contact us on 01932 830664 or through your usual client partner contact. As further details are announced, we will keep you informed.

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About the author

Andrew is the Operations & Business Advisory Director at Ward Williams Ltd having partner responsibility for a portfolio of owner managed business clients covering a wide spectrum of different industries, and which are primarily based around the Weybridge and Bracknell areas. He oversees the Business Services department processes for the timely delivery of year end accounts, tax compliance and company secretarial services.

He has extensive experience of providing accounting, VAT and business tax advice tailored to individual and corporate needs. Andrew can assist in identifying and delivering strategic tax planning solutions. As he acts for a number of property clients, this is one area of specialist interest. He also provides financial and accounting solutions to start-up's, owner managed enterprises and small groups.

Andrew’s primary goal is to provide a prompt and client focused service delivering tangible benefits through providing solutions to client problems and through identifying opportunities to assist in the growth and development of their business.