HMRC have delayed the introduction of their new VAT Reverse Charge until October 2020, in response to intense lobbying by the construction industry and the confusion surrounding Brexit.
The new rules, designed to prevent VAT fraud, were due to come into effect in October 2019. They will affect the building and construction industry; and apply to the buying and selling of construction services in instances where both the supplier and the customer are VAT-registered.
Instead of the normal system whereby the supplier issues an invoice including the VAT amount and the customer pays the full amount to that supplier; under the new rules, the customer will pay the VAT amount directly to HMRC.
There are exceptions outlined by HMRC which include professional services of architects and surveyors.
In a briefing note HMRC said:
“HRMC recognises that some businesses will have already changed their invoices to meet the needs of the reverse charge and cannot easily change them back in time. Where genuine errors have occurred, HMRC will take into account the fact that the implementation date has changed.”
John Bell, the senior partner at Clarke Bell, commented:
“I think HMRC are right to have delayed this, despite the confusion it will cause for those who have already changed their systems.
I do feel sympathy for the owners of small and medium sized VAT-registered firms in the construction sector who are going through a tough time anyway. The confusion around this, and Brexit, really isn’t helpful.
Clarke Bell work with a lot of companies in the building sector, and we know what a tough time many are having.”