The delay in charge for five months was due to the impact of the coronavirus (COVID-19) pandemic on the sector. The change will now apply from 1 March 2021 and will overhaul the way VAT is payable on building and construction invoices as part of a move to reduce fraud in the sector.
The domestic reverse charge is a major change to the way to collect VAT for certain kinds of construction services in the UK, along with any building and construction materials used directly in those services. However, it doesn’t apply to building and construction materials supplied separately, and independently, of any construction services.
Under the domestic reverse charge, the customer receiving the service will have to pay the VAT owed straight to HMRC instead of paying the supplier if they report via the Construction Industry Scheme (CIS).
Reforming the original legislation has excluded businesses to be from the reverse charge as they are end-users or intermediary suppliers. So, they must inform their subcontractors, in writing, that they are end-users or intermediary suppliers.
HMRC said the additional amendment is designed to make sure both parties are clear in regard to whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance. Furthermore, brings certainty for subcontractors as to the correct treatment for their supplies.
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