Delay to implementation of the new VAT Domestic Reverse Charge
The introduction of the Domestic Reverse Charge (DRC) for Construction Industry Services (CIS) will be delayed for a period of 12 months until 1 October 2020. HMRC reiterate that they are still committed to implementing it.
The DRC was due to come into effect on 1 October 2019. However, industry representatives raised concerns that some businesses in the construction sector were not ready to implement it on that date.
What is going to happen in the meantime?
HMRC has put in place a robust compliance strategy for tackling fraud in the construction sector using tried and tested compliance tools. Over the next year, HMRC plans to focus additional resource on identifying existing perpetrators of fraud and also work closely with the sector in raising awareness. This will provide additional guidance and help businesses to be ready for the new implementation date.
HMRC will also take into account the fact that some businesses will have already changed their invoices to meet the needs of the reverse charge and will not be able to change them back in time.
Some businesses may have opted for monthly VAT returns with the original implementation date in mind. This can be reversed by using the appropriate stagger option on the HMRC website.
What is the Domestic Reverse Charge?
The new Domestic Reverse Charge is the most significant change to VAT in construction services in 30 years. From 1 October 2020, sub-contractors in a CIS chain of supply will cease to collect VAT from other contractors. This makes the buyer of the sub-contractors service liable for VAT accounting in place of the supplier.
You can read more about the VAT Domestic Reverse Charge in Real Estate Matters Issue 13.Read Real Estate Matters Issue 13