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HMRC has announced that the domestic reverse charge for construction services will be delayed for a year until October 1st 2020, following concerns raised by industry representatives that some businesses aren’t ready to roll the change out by the start of October this year.
The domestic reverse charge means that customers who receive the service will have to pay the VAT, instead of paying the supplier. The change will only apply to those individuals or businesses registered for VAT in the UK.
The idea behind it is to make it harder for fraudsters to steal the VAT due, with the government first confirming that this step would be taken back in 2017. Final legislation and guidance were published in November last year.
Over the next 12 months, HMRC will prioritise identifying and tackling fraudsters while working alongside the industry to increase awareness and provide additional support and guidance to ensure all businesses are ready for the new implementation date.
“HMRC 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,” HMRC said in a statement.
“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.”
Welcoming the news, chief executive of the Federation of Master Builders Brian Berry said it made sense to delay the reverse charge VAT until it will have less of an impact on companies all over the country. To forge ahead with the initial implementation date would have been a disaster, given the fact that the UK is just expected to leave the EU in October.
He added that the government and industry must work as one to deliver a communications campaign that includes guidance on the changes, as well as delivering workshops aimed at employers to explain what’s happening and why.
The National Federation of Builders – part of a coalition of 15 construction firms campaigning for a six-month delay – also said the announcement was good news. Chief executive Richard Beresford observed that both contractors and sub-contractors simply weren’t ready for the change.
Now online guidance can be improved, workshops held and the entire industry helped to understand what the change will mean for their business.
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