In Revenue and Customs Brief 10 (2019) released on 6 September 2019 HMRC have announced that the introduction of the domestic reverse charge for construction services will be delayed for a period of 12 months until 1 October 2020.
The reasons given for the delay are to give businesses more time to prepare for the change and also to avoid the changes coinciding with Brexit.
HMRC also comment that in the intervening year they will be focusing additional resource on identifying and tackling perpetrators of the fraud. HMRC say ‘It has put in place a robust compliance strategy for tackling fraud in the construction sector using tried and tested compliance tools.’
The Revenue and Customs Brief can be accessed at the link below.
On a related topic construction businesses working in the residential sector should make sure that their subcontractors are charging them at the correct mix of reduced and zero rated VAT where possible. One of HMRC’s recent trends is to review a construction firm’s VAT recovery position and deny VAT refunds where a sub-contractor has charged VAT at 20% when it could have been charged at 5% or 0%. HMRC say the incorrectly charged VAT on these invoices is not technically VAT so cannot be reclaimed and they also claim there is an increased risk of sub-contractors not paying the VAT they collect onto HMRC.