HMRC have announced a new initiative and are applying new rules where the recipient of certain construction services will now be responsible for accounting for VAT, rather than the supplier.
Planned for 1st October 2019, this will be a specifically targeted campaign tackling the supply of services between construction firms, and will broadly apply where payments are required to be reported through the Construction Industry Scheme. Under the new regime, a VAT-registered business will need to issue a VAT invoice which confirms the service is subject to the new domestic reverse charge.
Initially anticipated to only apply to labour services, HMRC has now revealed it will extend to the provision of construction services including materials. This means the measures will affect many more businesses than it was originally thought.
As well as the reverse charge rules, construction businesses will also have to adapt their accounting systems to ensure they are Making Tax Digital compliant too.