Cornerstone - VAT reverse charge

06 July 2020

The VAT reverse charge is an upcoming mechanism being introduced by HMRC with the aim of preventing VAT avoidance by suppliers who charge and collect VAT but fail to account for it to HMRC.

The reverse charge shifts the responsibility for accounting to HMRC for VAT from the supplier to the recipient of the supply.

The reverse charge is expected to have a significant effect on the construction industry. Although there are some exceptions, in general terms it will apply to business to business supplies of construction services where the recipient is not the final consumer – so it will affect supplies between contractors, sub-contractors, and the rest of the supply chain.

The charge was due to come in last year but was delayed amid a general feeling that a lot of construction companies were either unaware of, or not sufficiently prepared for, this change. That broadly remains the case, but the good news is that its implementation has now been delayed again as a result of COVID-19 and an acceptance that firms’ minds have been elsewhere as a result. It is now due to come into effect from 1 March 2021.

Firms should not bank on this being delayed again, so now is the time to prepare your business if you have not already done so. Please get in touch and we can provide more information about the effect it might have on you and what measures you can and should be putting in place.

This article is from the July 2020 issue of Cornerstone, our monthly newsletter for those working in the construction industry. To download the latest issue, please visit the newsletter section of our website. For further information please contact a member of Birketts' Construction Team.

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at July 2020.