A few weeks ago, we published a Q&A on the controversial VAT reverse charge ahead of its anticipated implementation on 1 October 2019.
Fast forward to now and the landscape has changed, with HMRC announcing a 12 month postponement last Friday.
VAT reverse charge delayed for 12 months
Much of the detail remains the same, except that the introduction of the VAT reverse charge will be delayed until 1 October 2020.
The delay comes in response to concerns expressed by industry representatives; that some businesses in the construction sector would not be ready to comply with the new rules so soon.
By deferring for a period of 12 months, businesses will have more time to prepare. Furthermore, any clash with an October 2019 Brexit will also be avoided.
In HMRC’s briefing note, it states that it “remains committed to the introduction of the reverse charge and has already increased compliance resource” to tackle fraud in the construction sector.
In the interim, ahead of the new implementation date, HMRC will focus additional resource on identifying and tackling existing perpetrators of the fraud.
It has also confirmed that it will work closely with the sector to raise awareness, and provide additional guidance and support to make sure businesses will be ready in good time.
What if I’ve already made preparations ahead of October 2019?
In light of the push back, those who have already made changes to invoices may be worried about what happens next. Where genuine errors occur, HMRC has confirmed that it will take into account the changed implementation date.
Where affected businesses have opted for monthly VAT returns in response to the new rules, this can be reversed by using the appropriate stagger option on the HMRC website.
Tax partner Barry Jefferd said, “The deferred implementation of the VAT reverse charge will be welcomed by the industry who had requested a postponement. However, once again, HMRC have failed the taxpayer. The proposed changes should only be brought in following full consultation with those affected, and with realistic timetable expectations.”
Where can I go for guidance?
If you are a business within scope of the new VAT reverse charge rules and you are concerned about how the delay will impact upon you, or if you want support with preparing for the changes ahead of 1 October 2020, contact us today on 01480 426500.
You can also read our handy PDF summary of the anticipated changes, here.