There has been a last-minute change to the start date for the VAT domestic reverse charge (DRC) for building and construction services. This was scheduled to begin on 1 October 2019. It is now delayed until 1 October 2020.
The government cites concern that some businesses are not yet ready to implement the change – and possible coincidence with Brexit – as the reasons for the delay. Despite the delay, the government is still committed to the DRC and there has been no change to the detail of the legislation.
The DRC changes the way that VAT is accounted for. The recipient of specified construction services accounts for the VAT due on the supplies on their VAT return, rather than the supplier. This major change entails adaptation to invoicing and accounting systems, and a negative impact on cashflow for some businesses.
Where businesses have changed their invoicing to be DRC-compliant and cannot reverse this in time, HMRC will take this into account where genuine errors may occur. Businesses which have now adopted a monthly VAT return cycle, can change back during the interim if they prefer. If you would like assistance, please do contact us.