There was good news from HMRC today as it was announced that the implementation of the new domestic reverse charge for construction services has been postponed until 1 October 2020.
Planned to be introduced from 1 October 2019, many within the construction industry and the accountancy profession have raised concerns over recent months regarding the lack of awareness of the new rules among subcontractors and a perceived lack of sufficient preparation in many cases. A survey by the Federation of Master Builders in July had found that around two thirds of businesses in the construction industry hadn’t heard of the VAT changes and of those who had, around two thirds had made no attempt to update their systems in preparation.
Given the Brexit is still very much centre stage, today’s news will be widely welcomed across the construction sector as the widely anticipated cash flow impact and the risk of loss of jobs within the sector led many to predict that it may tip some companies over the edge. The postponement of the new rules for 12 months will ensure the industry is better prepared and by the revised implementation date we would hope there to be more certainty on the current Brexit standoff.
HMRC confirm that it recognises that some businesses may have implemented changes in their systems in anticipation of the new rules and will now have to revert back to previous arrangements. Given the late notice of the postponed implementation, HMRC accept that genuine errors may occur as systems are again updated to revert back to standard VAT accounting processes and will take this into account where compliance failures result.
Further information: HMRC announcement