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Last edited 08 Sep 2020
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.
The government announced that from 1 March 2021, a domestic VAT reverse charge would 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).
- Construction, alteration, repair, extension, demolition or dismantling of buildings, structures, non-permanent structures, offshore installations, works forming part of land (i.e. walls, runways, docks, railways, pipelines, etc.).
- Installation of systems such as heating, lighting, air-conditioning, ventilation, drainage, and so on.
- Internal cleaning of buildings and structures.
- Painting and decorating.
- Services which are an integral part of preparing or completing those above (e.g. site clearance, excavation, scaffolding erection, landscaping, and so on).
- Drilling and extraction of oil, natural gas, and minerals.
- Tunnelling and boring for underground works.
- Manufacture of building or engineering components and machinery.
- Signage and advertisements.
- Installation of seating, blinds, shutters, etc.
- Installation of security systems and alarms.
Industry representatives have raised concerns that some businesses in the construction sector are not ready to implement the VAT domestic reverse charge for building and construction on 1 October 2019.
To help these businesses and give them more time to prepare, the introduction of the reverse charge has been delayed for a period of 12 months until 1 October 2020. This will also avoid the changes coinciding with Brexit.
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