The reverse charge for VAT on construction services that was originally due to come into force on 1 October 2019 has been delayed for a second time. HMRC have confirmed, via the below brief published on 5th June, that the reverse charge measure is now being postponed until 1 March 2021 in light of the coronavirus pandemic.
Click here for the governments publication
In addition to the delay announced, the updated brief from HMRC also confirms a change to the VAT legislation that will enable the implementation of the reverse charge. For those businesses who can be excluded from the reverse charge, for example as they are “end users” or “intermediary suppliers”, such organisations will now be required to inform their sub-contractors in writing that they meet the conditions to be excluded from the reverse charge.
Whilst this is a welcome change in the current environment, those in the sector remain concerned at the changes given the cashflow impacts that may arise. Furthermore, the 5 month delay will now mean that the revised implementation date will coincide with the month when any deferred VAT payments become due, i.e. those deferred as a result of the Covid-19 pandemic, which could place extra pressure on businesses. It remains to be seen whether further industry pressure will see a further delay to the implementation date.
Whilst welcome, the further delay does not help those businesses who have already taken steps to amend systems and processes to get ready for the changes. HMRC need to provide some certainty in this regard so that planning can take place ahead of 1 March 2021.
We would be keen to discuss the implications of this with you in further detail, do please get in touch or contact your usual BHP contact.
If for any reason I am unavailable in the office due to the current working situation, then you can reach me on my mobile, 07514950526. Please call or text me and I will get back to you ASAP.
