The government has said it is putting the introduction of the VAT domestic reverse charge for construction services on hold for a further 12 months until 1 October 2020.
A short government briefing has explained that industry representatives had raised concerns that many construction sector businesses were not ready to implement the changes on the original date of 1 October 2019. To help them prepare, and to avoid the new rules kicking in at the same time as the UK’s potential exit from the European Union, the reverse charge had been delayed.
HMRC said that it remains committed to introducing the charge and in the delayed 12 month period it will focus on identifying and tackling existing offenders of VAT-related fraud in the industry. HMRC further committed to working closely with the sector to raise awareness and provide additional guidance to make sure all businesses will be ready for the new implementation date.
If your business has already implemented changes to comply with the new ruling, do not panic. In a statement to announce the delay, HMRC acknowledged that some businesses will have already converted their invoices to meet the needs of the reverse charge and they understand these cannot easily be reverted back before the original deadline. Where genuine errors have occurred, they have said that they will take into account the late change to the implementation date. For now, it is suggested that businesses who had switched to monthly VAT returns revert back to quarterly.
The PM+M team will continue to provide updates on any further developments.