HMRC delays implementation of reverse charge VAT

HMRC has announced a one-year delay to 2020 to the introduction of reverse charge VAT in the construction sector, which was due to be implemented next month, after industry bodies and accounting specialists highlighted concerns about lack of preparation and the potential impact on businesses.

The charge was to be implemented on 1 October, but has been deferred until 2020, to allow businesses more time to prepare.

In the interim, HMRC will focus additional resources on identifying and tackling existing perpetrators of the fraud. It will also work closely with the sector to raise awareness and provide additional guidance and support to make sure all businesses will be ready for the new implementation date.

A statement from the regulator said: “HMRC remains committed to the introduction of the reverse charge and has already increased compliance resource. It has put in place a robust compliance strategy for tackling fraud in the construction sector using tried and tested compliance tools.”

The Chartered Institute of Taxation (CIOT), who were against the early implementation of the charge welcomed the postpostment.

Linda Skilbeck, vice-Chair of CIOT’s Indirect Taxes sub-committee, added: “Today’s announcement is good news. There is substantial evidence of a lack of awareness of this change, and a lack of preparedness even among those businesses who are aware of it.

“A start date of October 2020 is more sensible. This should allow time for a dedicated information campaign to be operated by HMRC, with the assistance of industry and professional bodies.”

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