..and this time it’s the Construction Industry that’s firmly in HMRC’s sights.
On 1st October 2019 a new VAT regime will be implemented within the building and construction industry. This scheme, the Domestic Reverse Charge will require VAT registered businesses under the remit of CIS, to change the way they invoice, account for and pay VAT over to HMRC.
No longer will suppliers issue invoices including VAT but rather invoice for materials and services noting that the Reverse Charge applies; signalling to VAT Registered customers tax should be calculated on the net value and paid over to HMRC on the suppliers behalf.
The scheme aimed at reducing VAT fraud within an industry closely associated with tax evasion applies to specified services attracting standard and reduced rate VAT. Zero rated supplies are exempt from the scheme as are services provided to consumers, end users, Non-VAT registered customers and employment agencies.
The timing of the scheme is concerning with October 2019 already primed for a raft of changes including the end of MTD deferment and the possibility of a No Deal Brexit. HMRC has been criticised for the delay in providing detailed guidance to businesses who will now be scrambling to prepare for yet another huge VAT change with only three months’ grace.
The effects of these changes will cause major headaches for small businesses who may need to consider VAT schemes and timings as well as the loss of working capital. It’s a good opportunity to call in the services of a bookkeeper to start planning, preparing and streamlining processes ready for the change.