On 06/03/24 Chancellor Jeremy Hunt presented his Spring Budget to… Read More
This reverse charge measure is coming in to effect on 01/03/21. A Revenue and Customs Brief was issued in June 2020, giving more information.
Every VAT registered construction business should have received an individual letter in January 2021 (further to letters sent in February and September 2020), advising them to check if they might be liable for the reverse charge. If they are liable, they should start to prepare now.
Essentially this new rule will result in a contractor no longer paying VAT over to their sub-contractor and instead pay it directly to HMRC via their own VAT return.
To reduce VAT fraud in the construction industry, so preventing builders from charging VAT and not paying it to HMRC. It was announced as part of the 2017 budget to combat what HMRC estimates to be £100m of revenue lost through trader fraud.
Further guidance from HMRC is here – https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services#determining-reverse-charge-treatment-of-existing-contracts-to-be-ready-for-1-october-2019
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