VAT reverse charge for construction services
21st January 2021
The VAT domestic reverse charge for building and construction services is now scheduled to come into effect from 1 March 2021. The original introduction date was changed from 1 October 2019 to 1 October 2020 and revised again in June 2020 due to the impact of Covid-19. The legislation has not changed since it was enacted in 2019 except for a useful change to the requirements placed on ‘end users’ and ‘intermediary suppliers’.
The reverse charge represents part of a government clampdown on VAT fraud. A domestic reverse charge means that a contractor receiving a supply of specified construction services must account for the output VAT due, rather than the sub-contractor who supplied the services. The contractor also deducts the VAT due on the supply as input VAT, subject to normal VAT rules, meaning no net tax is usually payable to HMRC. The reverse charge thus removes the scope to evade any VAT owing to HMRC by the sub-contractor.
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