If you work in the Construction sector and had already put your preparations on hold to adhere to the Domestic Reverse Charge VAT legislation for the revised implementation from October 2020, you don’t yet need to resume your plans just yet! HMRC have announced that the new law will now be effective from 1st March 2021.
WILL THE DOMESTIC REVERSE CHARGE VAT STILL BE IMPLEMENTED?
Yes. Despite HMRC announcing on 28th May 2020 that the new legislation will be continue to be effective on 1st October 2020 (having already delayed it for a year from October 2019 due to Brexit), just a week later, the press office confirmed that it would in fact be delayed for a further 5 months to 1st March 2021.
The new rules will 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.
HOW COULD THE DELAY AFFECT ME?
Thousands of businesses and self-employed workers have had their cashflow negatively impacted by the recent Coronavirus outbreak. To assist in this situation, the Chancellor had allowed the deferment of VAT payments for the period 20th March to 30th June 2020, to be paid in arrears by 31st March 2021. This date is very close to the new Reverse Charge implementation date of 1st March 2021, therefore you will need to be mindful of your cashflow, particularly if you are a subcontractor working in the construction trade.
FURTHER INFORMATION
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 March 2021.
You can read the full document from HMRC by clicking here.
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.