The introduction of the domestic reverse charge for the construction industry is deferred again until 1 March 2021

Posted on 10th June 2020 by Streets


Image to represent The introduction of the domestic reverse charge for the construction industry is deferred again until 1 March 2021

The change was initially due to be introduced on 1 October 2019, but following industry pressure in light of Brexit and the negative impact it would have on the sector, this date was pushed back to October 2020.

Within the last seven to ten days, HMRC’s press office initially confirmed that that the new domestic reverse charge rules for the construction industry would commence on 1 October 2020. It was then announced that its introduction would be delayed until 1 March 2021. No doubt news of its deferment will be well received across the sector as its deals with the impact of Covid-19.

When it comes into effect on 1 March 2021, it means the customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier.

It will only apply to individuals or businesses registered for VAT in the UK (although it will not apply to consumers).

This will affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).

Whilst these changes have been delayed, it is important to remember that they are still very likely to come into effect next year. Businesses are urged to use this period of grace to make sure they are fully prepared. In particular, concern is raised about the new timing of the scheme’s introduction as it is very close to the 31 March 2021 deadline for paying the VAT arrears deferred during the VAT payment holiday (between 20 March and 30 June 2020).

As such there is the risk of pressure on businesses cash flow as they get to grips with the new scheme and make up payments previously deferred. Therefore, it is important to consider the cashflow implications relating to the introduction of the new scheme.

Depending on the impact of the scheme on your business, there may also be a need to consider the timing of your VAT returns. Businesses that currently submit a quarterly VAT return may want to consider submitting a monthly VAT return instead, to help cashflow, if they are likely to be in receipt of recovered input tax.

Whilst the scheme’s introduction has been delayed by ten months, we would recommend that those who may be affected consider its impact beforehand to safeguard against any potential financial pitfalls.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


Is it time to reflect on the culture of your organisation?

Having been involved in recruitment interviews recently, in which seemingly all applicants asked what the culture of the organisation was like, it did give rise to reflection on the same and what is meant by culture and how it affects the success or otherwise of an organisation. Organisational ...


Class 4 NICs who is liable?

Most self-employed people are required to pay Class 4 National Insurance contributions (NICs) if their profits are £12,570 or more a year. Class 4 NIC rates for the tax year 2024-25 are 6% (2023-24: 9%) for chargeable profits between £12,570 and


Post Transaction Valuation Checks

A Post Transaction Valuation Check (PTVC) can be requested from HMRC for an individual to work out a capital gains tax liability or for companies to calculate corporation tax liability on chargeable gains. The request for a PTVC should be made using


You might also be interested in...