Further delay in implementation of Construction Services Domestic Reverse Charge

HMRC has issued a short brief, which outlines that the introduction of the domestic reverse charge for construction services will be delayed a further 5 months until 1 March 2021, due to the impact of the Coronavirus pandemic on the construction sector.

The domestic reverse charge for building and construction services was originally planned to come into force on 1 October 2019, but this was initially delayed for a year in response to industry concerns that some businesses were not ready to implement the changes required.

This further extension has been implemented to help businesses overcome the effects that the Coronavirus pandemic has had and provide additional time to prepare for the introduction of the reverse charge

HMRC have also confirmed that there will also be an amendment to the original legislation, which was laid in April 2019, 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.  This 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 followed, it will remove a concern that HMRC may seek to challenge the reverse charge treatment where a business that qualified as an end user or intermediary supplier had not given any notification of their status.

In the intervening period, HMRC will continue to 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.

If you have a query about the domestic reverse charge, please contact our VAT team today at vat@chiene.co.uk.