If you’re working in the Construction sector and have been preparing for the Domestic Reverse Charge VAT legislation from HMRC or have already implemented changes to your procedures to comply, please read the advice below following an announcement on Friday from HMRC to delay the changes until October 2020.
WHAT ANNOUNCEMENT HAS BEEN MADE?
On Friday 6th September 2019, less than a month before the new legislation was due to be effective, HMRC released Brief 10 (2019) after concerns from construction industry representatives that many businesses would not be ready for the changes involved in complying with the Domestic Reverse Charge VAT.
With the current tension and uncertainty in the political arena, the decision to delay the implementation of the new law for 12 months until 1st October 2020 was made to also avoid clashing with Brexit.
HOW WILL I BE AFFECTED IF MY PROCESSES HAVE ALREADY BEEN CHANGED TO COMPLY WITH THE DOMESTIC REVERSE CHARGE VAT?
Whilst many construction companies and individuals working in the sector as well as professional services firms will have made changes to invoice processing and accounting to ensure they have complied with the original deadline of 1st October 2019, unfortunately this announcement means you will have to revert to your former method of charging and declaring responsibility for VAT on invoices.
- If you had opted for monthly VAT returns, you can change this back by selecting the appropriate stagger option on the HMRC website.
- Whilst you need to revert back to your previous invoicing and accounting processes, HMRC will recognise the short notice of this announcement and take this into account where any genuine errors are made.
WILL THE DOMESTIC REVERSE CHARGE VAT STILL BE IMPLEMENTED?
Yes. The new legislation will be effective on 1st October 2020 and apply throughout the supply chain to any B2B construction supplies, shifting the VAT responsibility to the final customer or ‘End User’ to combat fraud and prevent the exploitation and avoidance of VAT payments by sub-contractors and construction workers within the construction industry.
At LWA, we have written a series of advisory blogs explaining what the Domestic Reverse Charge is; why it will become law; which services will be affected; and what you need to do to comply. Visit our blog and search ‘Property’ to find out more, however please note, the date to comply has been changed to 1st October 2020.
Please contact the LWA Tax team in Warrington on 01925 830 830 or call our South Manchester office on 0161 905 1801 if you need to speak to us about the recent announcement from HMRC on the delay of the Domestic Reverse Charge VAT.