he reverse charge for construction and building services that was announced in the 2018 budget and due to come into force on 1 October 2019 has been delayed until 1 October 2020. This is a surprise move by HMRC as it came so late in the day, but it is to be welcomed given that many businesses are already struggling to cope with the potential impact of Brexit and MTD.

It is of course presumed that the UK will have exited the EU by the time the reverse charge is introduced!

As a brief reminder, the reverse charge is intended as an anti-fraud measure and requires businesses that are not either an end user or intermediary to account for VAT on supplies of construction and building services received from sub-contractors by making a reverse charge. That is by the customer declaring and recovering VAT on the supply made to it by the sub contractor instead of paying the VAT to the subcontractor who would then declare it to HMRC. There are certain exceptions to the reverse charge and as with any VAT scheme it comes with a host of compliance requirements.

It is expected that HMRC will be closely monitoring and reviewing businesses that supply construction and building services prior to 1 October 2020, given that the reverse charge was intended to act as an anti-fraud measure to combat perceived widespread VAT fraud within the sector. This will especially be the case with businesses that submit VAT repayment claim returns, as is fairly usual given that many property developments take at least a year or more to construct before any income is generated by the property developer.

This makes it even more crucial that businesses operating in the construction sector and their customers understand the correct VAT treatment of the supplies that are being made.

If you or your client require VAT advice on any land and property related issues please do not hesitate to contact our VAT helpline for an initial free of charge discussion.

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