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The VAT Reverse Charge for Construction Services has been Delayed to 2020


Back in July we reported on the Domestic Reverse VAT Charge for Construction Services, which will change the way VAT is collected in the construction industry, and was due to be implemented in October 2019.

In what many commentators are calling a victory for common sense, implementation has been delayed for 12 months, and will now go ahead in October 2020 instead.

What is the VAT Reverse Charge?

The reverse charge is intended to tackle so called “missing trader fraud”, where suppliers charge VAT and disappear without ever paying the VAT they’ve collected to HMRC. Instead of paying VAT to the supplier, the customer or client will pay directly to HMRC, thus removing the opportunity for the supplier to “steal” the VAT.

The Reasons for the Delay

The government has published a short briefing online, giving “concerns that some businesses in the construction sector are not ready” as the reason for the delay and it would seem that the construction industry agrees. Speaking to Accounting Web, FMB Chief Executive Brian Berry has expressed his concern that so few employers have heard of reverse charge VAT “despite the best efforts of construction trade associations to communicate the changes to their members”.

The intervening year

In their briefing, the government confirm their commitment to the introduction of the reverse charge, and promise further resource to tackle VAT fraud in the intervening year. For those whose preparations are not complete, it may be tempting to shelve them for now but it’s important to remember that the change is still coming, and affected businesses should use the additional time wisely.

If you’re supplying staff to the construction industry

Recruiters who supply staff to the construction industry should not be affected by the VAT reverse charge, as the supply of staff is not included in the definition of “construction services”. This is still true, even where staff are supplied to undertake construction services.

The only way a recruiter might be affected is if they supply other services as well, for example if they manage the work itself. The important distinction between the supply of staff and the supply of construction services, is whether the staff are employed or paid by the business using them to supply construction services.

This is one of many good reasons to partner with a contractor management specialist like Orange Genie Construction. Whether your workers are employed by our umbrella company or using our CIS self-employed solution, invoices for their services will not be affected by the VAT reverse charge, and any confusion can be avoided.

If you have any questions or if we can help in any way, please contact our expert team on 01296 468 483 or email info@orangegenie.com.

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