From 1 October 2019 a VAT reverse charge will apply in the UK to supplies of construction services. Draft regulations have been published for consultation, setting out the details.
This will mean that the customer will be liable to account to HM Revenue & Customs (HMRC) for the VAT in respect of supplies of certain construction services, rather than the supplier hence the ‘reverse charge’.
The customer will pay the supplier for the services but will pay the VAT element direct to HMRC. The reverse charge will apply through the supply chain up to the point where the customer receiving the supply is no longer a business that makes supplies of construction services.
This is a huge change to how VAT is accounted for in the construction sector, and the impact on administrative systems is likely to be significant, and expensive!
If you would like to discuss this, or any other VAT related issues, please contact Andy Summers on 01788 539000.