Reverse charge VAT for builders delayed again

The domestic reverse VAT charge for construction services, due to kick in from 1 October 2020, has been delayed until 1 March 2021.

The way VAT is collected in the building and construction industry was originally due to change from 1 October 2019.

But that was put on hold for 12 months to avoid the measure clashing with one of the UK's scheduled exits from the EU.

With construction firms and builders feeling the strain from COVID-19 and lockdown, HMRC has announced a further five-month delay.

The Chartered Institute of Taxation (CIOT) welcomed the move, with many firms feeling the effects of reduced business activity.

Linda Skilbeck, vice-chair of the CIOT's indirect taxes committee, said:

"We welcome the further delay because of the many unexpected pressures caused by the pandemic and the lockdown on construction businesses.

"A significant proportion of those are SMEs, and the cashflow effect of the domestic reverse charge will be significant.

"The delay should lessen the chance of disputes between suppliers and customers as to which party in the supply chain should account for VAT."

Get in touch to discuss the reverse charge.