HMRC announced on 5 June 2020 that the domestic reverse VAT charge for construction services will now be introduced on 1 March 2021, being pushed back from the original date of 1 October 2020.

The October introduction was itself a delayed introduction, as the reverse charge was originally set to be introduced on 1 October 2019. 

HMRC has updated its guidance to confirm that 1 March 2021 is the new introduction date. HMRC has also published Brief 7 (2020) to detail the change.

The Brief explains that HMRC has delayed the introduction due to the impact of the coronavirus pandemic on the construction sector.

HMRC has also explained in the Brief that there will be an amendment to the original underpinning legislation. The change will create a requirement for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, to inform their sub-contractors in writing of their status.

The postponement will be welcome news for many in the construction sector. Whilst the purpose of the change is to help HMRC combat fraud in the construction sector, it will result in cash flow and administrative challenges for many construction businesses. This postponement will provide construction businesses additional time to prepare for such changes.

Contact us

Please contact your usual Johnston Carmichael VAT contact or a member of our VAT team if you would like to discuss this update further. Alternatively, you could email me directly and I will be happy to discuss further.