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VAT: Construction industry reverse charge delayed again to March 2021

The domestic reverse charge anti-fraud measure for the construction industry has been delayed once again by five months to 1 March 2021

Monthly VAT returns: If all or most of your income will be subject to the reverse charge, they will be VAT repayment traders – with input tax to claim on materials and overheads but very little or no output tax to pay. In that case it makes sense to submit monthly rather than quarterly VAT returns after 1 March 2021, to accelerate input tax recovery

Flat rate and cash accounting schemes: Another action point for builders is to leave the flat rate scheme. It will also make sense to leave the cash accounting scheme in many cases, so that input tax can be claimed on the date the purchase invoice is received from suppliers instead of the payment date

The introduction of the reverse-charge system necessitates changes to agreements between customers and suppliers, updates to accounting systems (including invoicing procedures) and will impact on the business’ cashflow. For businesses to be excluded from the reverse charge, as they are end users or intermediary suppliers, they must now inform their sub-contractors in writing that they are end users or intermediary suppliers

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