HMRC Announce 12 month delay to introduction of the Domestic Reverse Charge for VAT

On Friday 6 September, HMRC issued Revenue and Customs Brief 10 (2010) announcing that the introduction of the Domestic Reverse Charge for construction services will be delayed for a period of 12 months, until 1 October 2020.

With just weeks to go to the introduction, HMRC have now responded to the concerns raised by industry representatives around the impact of the new measures coupled with Brexit.

Whilst the introduction is delayed, HMRC confirmed they remain committed to the introduction of the reverse charge. In the intervening year, HMRC will focus additional resource on identifying and tackling existing perpetrators of fraud in the sector.

Whilst welcome news, many business will have incurred costs in changing systems, invoicing and processes in readiness for the changes and will need to unpick these changes for the time being. The late notice is therefore disappointing for some, but a great opportunity for some forward planning for most.

HMRC have advised that where genuine errors occur as a result, HMRC will take into account the fact the implementation date has changed. Presumably, this will include a light touch to penalties resulting from errors caused by HMRC’s delay.

Businesses that have changed their VAT reporting stagger e.g. to monthly VAT returns will need to consider the impact on cashflows and compliance burden and potentially change their VAT staggers back.

For more information please contact Hydeam Sulton, Head of VAT and Indirect Tax, on 0191 226 8351.