Domestic Reverse Charge – new rules for Construction Industry

News, VAT,

From the 1st October 2019, the rules around VAT for the construction industry are changing. These changes will affect everyone in the supply chain, including contractors and sub-contractors. The new Domestic Reverse Charge for building and construction services should reduce VAT fraud and simplify the VAT process in the industry. VAT will be paid to HMRC directly by the end customer, rather than collected and paid over by the Supplier.

  1. If you’re a contractor or subcontractor, you’ll need to check whether the Domestic Reverse Charge will directly affect you. Not all businesses in the industry are affected.
  2. You’ll also need to make sure the your bookkeeping system is amended to take account of the change.
  3. You may also need to check the impact on your cashflow if you are not going to be receiving and paying over VAT each quarter.

HMRC has said that a ‘light touch’ will be applied during a six month window, as long as a business can show it’s doing its best to implement the new rules. Penalties will apply where HMRC officers feel a taxpayer is deliberately taking advantage of the light touch period.

The best approach to take will differ depending on the services you supply, with HMRC having given a lot of guidance on the GOV.uk website. We would recommend that you review the information here, and then contact us if you would like to clarify the impact on your business.

PLEASE NOTE – This change has been delayed until 1st October 2020. Find out more here.