You may have read our blog that was publish last year, regarding the new VAT regime for the construction industry, being put on hold until 1st October 2020.
HMRC has confirmed it will extend this postponement to introduce reverse charge VAT in the construction industry for a further 9 months, and will start the regime on 1st March 2020.
Why have HMRC postponed this new reverse charge, again?
An overhaul of VAT in the construction industry has been pushed back to 2021 due to the impact of the coronavirus pandemic.
Reverse charge VAT, which would put an end to subcontractors receiving VAT payments in most situations, will now be introduced on 1 March 2021.
What does this mean for you and your business?
Many businesses will breathe a sigh of relief. The extra time allowing them to prepare for these changes, will allow systems and procedures to be implimented to combat the impact on cashflow.
But it is still coming. HMRC remains committed to the introduction of the reverse charge, and will be introducing the reverse charge in March 2021.
What actions should be taken?
Although there is a deferral, actions will still need to be taken. As stated in our previous blog, construction businesses should:
- Review supplies made to and received from other VAT registered contractors to establish whether these will be subject to a reverse charge from 1st March 2021;
- Consider the adaptions that will need to be made to their accounting systems to deal with this change and;
- Consider the impact on their cash flow from 1st March 2021, and if there are any other ways to mitigate this impact.
Additionally, contact us to discuss how this is going to affect your business.
