Newsletter October 2019

STOP PRESS – VAT REVERSE CHARGE FOR BUILDING SERVICES – NEW GUIDANCE

Purpose of this brief

This brief explains that the introduction of the domestic reverse charge for construction services will be delayed for a period of 12 months until 1 October 2020.

Background

A domestic reverse charge means the UK customer who get supplies of construction services must account for the VAT due on these supplies on their VAT return rather than the UK supplier. This removes the scope for fraudsters to steal the VAT due to HMRC and follows similar measures introduced in response to criminal threats for mobile telephones, computer chips, emissions allowances, gas and electricity, telecommunication services and renewable energy certificates. There has been a long lead-in time ahead of the anti-fraud measure coming into force. The Government first confirmed it would be taking this measure forward at Autumn Budget 2017. A technical consultation on the draft legislation and its impact took place in summer 2018 and the final legislation and guidance were published in November 2018. The long lead-in time was to allow for potential cash-flow and administrative impacts the change could have on businesses. Businesses need to adapt their accounting systems for dealing with VAT and there will be a negative impact on the cash-flows for many affected businesses, as they will no longer get VAT payments from customers for services where the reverse charge applies.

Explanation of the change

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.

From surveys made, it seems a large number of VAT and CIS registered businesses that fall under this new Domestic Reverse Charge, do not fully understand this new scheme. If we can help in this matter or any other, please do not hesitate to contact us.

Link to full update HMRC Policy Notes

DATES TO REMEMBER:

1 October 2019 - Due date for Corporation tax for companies with an accounting period ended 31 December 2018.

7 October 2019 - Due date for filing and payment of VAT for the period ended 31 August 2019, unless you submit a paper return then the date is 30 September 2019.

31 October 2019 - Midnight deadline for paper submission of SA tax returns for the tax year ended 5 April 2019 to be received by HMRC

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Monthly Dates:

19th of the Month:

Due date for postal payments of PAYE, NIC and CIS deductions and on-line filing deadline for CIS300 monthly return to HMRC.

22nd of the Month:

Due date for electronic payments of PAYE, NIC and CIS deductions to HMRC.
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