What is the domestic reverse charge?
A domestic reverse charge means the UK customer who gets supplies of construction services must account for the VAT due on these supplies on their VAT return rather than the UK supplier.
The intention of the domestic reverse charge introduction is to remove the scope for fraudsters to steal the VAT due to HMRC.
There has been a long lead-in time ahead of the anti-fraud measure coming into force. The Government first confirmed the measure during the Autumn Budget 2017.
The long lead-in time was to allow for potential cash-flow and administrative impacts the change could have on businesses.
Businesses need to adapt their accounting systems for dealing with VAT and there will be a negative impact on the cash-flows for many affected businesses, as they will no longer get VAT payments from customers for services where the reverse charge applies.
Industry representatives have raised concerns that some businesses in the construction sector are not ready to implement the VAT domestic reverse charge for building and construction on 1 October 2019.
To help these businesses and give them more time to prepare, the introduction of the reverse charge has been delayed for a period of 12 months until 1 October 2020. This will also avoid the changes coinciding with Brexit.
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.
Some businesses may have opted for monthly VAT returns ahead of the 1 October 2019 implementation date which they can reverse by using the appropriate stagger option on the HMRC website.
Credit gov.uk website
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