Changes to VAT rules on construction services from 1 October 2019
The VAT rules on construction services are changing from 1 October 2019 for contractors and sub-contractors. A VAT reverse charge is being introduced, which means that VAT will need to be handled and paid in a different way.
The new rules mean that the contractor (customer) will have to pay the VAT due instead of the sub-contractor (supplier). The changes are being implemented as a response to missing trader fraud and will prevent losses estimated at around £100m per year.
HMRC published guidance on 7 June 2019 which includes information about how to mitigate any cash-flow impacts: https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services.
HMRC will be operating a light touch period during the first six months where we will assist businesses that are trying to comply, but have struggled for genuine reasons. The HMRC Business Payment Support Service are aware that some businesses may require assistance with paying their taxes as a result of the loss in cash flow. Any assistance will depend on the specific circumstances of individual cases, but might include granting businesses more time to pay the tax they owe or arranging an instalment plan:
Traders who have further concerns or questions can contact HMRC via: indirecttax.vatsncfteam@hmrc.gov.uk