VAT Domestic Reverse Charge delay – Action required if businesses altered return accounting dates
Alison Horner, Indirect Tax Partner at MHA MacIntyre Hudson, says while the 12-month delay to the introduction of the VAT domestic reverse charge for the construction sector is a welcome relief, it’s very frustrating for the businesses which spent time and money to properly prepare.
“For the whole industry, the delay will be a relief. Over the last 6-12 months businesses have been spending time and money to ensure they are ready for the changes. There was a serious concern that many sub-contractors would go out of business as a result of the new rules.
“The introduction of Making Tax Digital and the threat of Brexit at the end of October or soon after seem to have convinced HMRC it was too much to expect a key industry sector to implement such significant changes at this time.
“For those who invested the time and money to be ready, it will be frustrating and it will have been costly, but they will be prepared when the charge is introduced next October. The worst affected will be those sub-contractors who moved to monthly returns to get ahead of the changes. These sub-contractors will need to reverse their VAT return accounting dates as soon as possible, which HMRC said they will facilitate. By remaining on monthly returns sub-contractors may find they have cash flow problems in funding an unexpected VAT payment to HMRC They are the only ones who need to take immediate action. The rest can breathe a sigh of relief.”