Delay to implementation of domestic reverse charge VAT for construction service

HM Revenue & Customs (HMRC) has announced that the implementation of the VAT domestic reverse charge will be delayed for another five months until 1 March 2021.

The VAT domestic reverse charge is intended to tackle fraud in the construction sector. It will see UK customers who receive supplies of construction services accounting for the VAT due on these supplies, and recovering this VAT as appropriate, on their VAT return, rather than the UK supplier.

HMRC states that: “This removes the scope for fraudsters to steal the VAT due to HMRC and follows similar measures introduced in response to criminal threats for mobile telephones, computer chips, emissions allowances, gas and electricity, telecommunication services and renewable energy certificates.”

Sean McGinness, partner and head of the Real Estate Group at Saffery comments:

“It is very welcome news that HMRC is to delay the implementation of the VAT domestic reverse charge to March 2021. I hope that the additional time is used to produce better guidance on the application of the new rules. There are so many nuances in the construction and development supply chains that a proper set of examples is required to give the required certainty to businesses that are affected.”