Last edited 15 Jul 2019

VAT reverse charge

Value Added Tax (VAT) is a tax added to the cost of certain goods and services. It is only accountable where the party raising an invoice is VAT-registered. Parties must register if their VAT-able turnover exceeds a minimum threshold in any 12-month period.

From 1 October 2019, a domestic VAT reverse charge will come into effect to tackle fraud in the construction industry. A reverse charge enables a customer to charge themselves VAT rather than the supplier charging it. This removes any opportunity for the supplier not to pay HMRC (missing trader fraud).

The reverse charge will apply to businesses that supply services to another business that will then sell on that service, but not those that supply services to consumers.

Sometimes referred to as the domestic reverse charge is intended to apply only to supplies of specified construction services which are subject to the standard and reduced rate of VAT, which include:

Services and supplies that will be excluded from the reverse charge include:

Ref https://www.gov.uk/government/consultations/draft-legislation-vat-reverse-charge-for-construction-services

In July 2019, the Federation of Master Builders called for a six-month delay following research that found more than two thirds of construction SMEs had not even heard of the reverse charge.

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