The Government has announced that the implementation date for the reverse charge on construction services will be delayed until 1 October 2020.
Businesses will now have a further year to plan for the change, although those businesses that have already implemented changes in advance may have to delay or reverse those changes in the meantime.
Background
Earlier this year, the Government enacted legislation to introduce a reverse charge on certain supplies of construction services with effect from 1 October 2019. The Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 (SI 2019/892) will, in general terms, introduce a VAT reverse charge on supplies of construction services to which the provisions of the Construction Industry Scheme (CIS) also apply.
However, since the purpose of the legislation is to prevent missing trader fraud opportunities within the construction industry, the legislation includes a number of exceptions for low risk situations, such as where the supply is made to the final consumer. Further details are set out in “VAT reverse charge for construction services”.
On 6 September 2019, the Government announced that the reverse charge will now be implemented a year later, on 1 October 2020.
This is in part to allow businesses more time to prepare for the introduction of the reverse charge, since the Government had received representations from the Industry that some businesses were not yet prepared to operate the charge.
Comments
The delay will be welcomed by many businesses in the construction industry. However, the announcement of the delay has been left very late and some businesses will have prepared for the introduction of the reverse charge and may now have to delay or reverse any planned changes to their systems.
HMRC states that it will take into account the fact the implementation date has been changed where genuine errors occur as a result of the delay.
