Government delays VAT Reverse Charge

The Government has announced that the controversial VAT Reverse Charge rules for the construction sector will be delayed until 1 March 2021 due to the Coronavirus pandemic.

The VAT Reverse Charge rules, which effectively transfer the responsibility of paying VAT from a supplier to the business using their services, was originally due to come into force in October 2019 before being delayed for a year until October 2020.

Due to this latest extension, VAT-registered businesses and individuals that supply or receive specified services that are reported under the Construction Industry Scheme (CIS) will now have an additional five months to prepare for the complex new rules.

The Government has also introduced new amendments to the system as part of the delay. These will require firms that are end-users of goods and services to notify suppliers and subcontractors of their status.

HMRC introduced this change to ensure subcontractors are clear as to how to treat VAT payments and charges.

For further details on the rules surrounding the VAT Reverse Charge, please click here to read the Government’s latest guidance.

Despite the latest delay, it is recommended that those businesses that are likely to be affected by the change seek additional support now to make sure they are compliant when the scheme is introduced and not adversely affected by the new rules.