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VAT reverse charge for construction services

Posted on 2 November 2018SharePrint

Background

VAT fraud in construction sector supply chains presents a significant risk to the Exchequer.  To prevent possible fraudulent activity, on 1st October 2019 there will be an overhaul of the VAT rules which apply to the construction sector. The new regulations will mean that for certain supplies of construction services, rather than the supplier charging and accounting for the VAT, the recipient of those supplies accounts for the VAT. The government estimates that the measure will impact 150,000 organisations and raise an average of £100m a year.

What is the impact of the VAT reverse charge?

It will be crucial for organisations to take account of the added costs and resources which will be required to implement the new rules.

It is important that before the implementation date, construction businesses review supplies to and from other VAT registered contractors and establish whether these will be subject to the reverse charge process. Amendments to VAT accounting systems are likely to be required to allow for these changes. Accurate records of all reverse charge supplies will need to be kept to enable correct reporting on the VAT return. Suppliers may need to take account of the fact that there will be a loss of cash flow where VAT is no longer charged.

Does the VAT reverse charge for construction services apply to everyone?

End users including individuals, non-VAT registered entities and those constructing buildings or civil engineering works for their own use or future sales are excluded from the application of the reverse charge process.  Supplies between group companies will also be excluded.  It will also not apply where the parties are landlord and tenant.

How can UK Training help?

Like all things that are new, you will need clear guidance from people with experience in this area. Our course, UK VAT on Land, Property and Construction, is currently being updated to include  a session which will contain all the latest information available on the new rules.

To find out more about the course and to view the upcoming dates, please go to this page. If you have 6 or more people who require the training, you may wish to consider our in-house training option too - contact us for more information.