Those working in the UK’s construction industry will have to handle and pay VAT differently from 1 March 2021, unless there’s another last-minute Government U-turn on Reverse Charge VAT.

This is when the VAT domestic reverse charge for building and construction services, to use its full name, will finally take effect at the third time of asking. In this article, we’ll refer to it simply as the ‘reverse charge’.

The reverse charge affects VAT-registered businesses that operate under the construction industry scheme (CIS). These are usually tradespeople who either take on contracts or subcontract others within a typical supply chain.

The reverse charge was originally due to kick in from 1 October 2019, but that was put on hold for 12 months to give businesses more time to prepare for the UK’s exit from the EU. Then, on 5 June 2020, after many construction sites in England downed tools during the first national lockdown in April 2020 the introduction date of the reverse charge was put back by another five months – from 1 October 2020 to 1 March 2021.

Speaking at the time, a HMRC spokesperson said extending the deadline would “help businesses overcome the effects that the pandemic has had on them and give them more time to prepare”.

If you’re VAT-registered and work in the construction industry, the new rules are complex and change how you account for VAT. As a result, you might need to change how you present information on your invoices to your customers and how you prepare your VAT returns. If you are not VAT-registered you may find that you now need to register for VAT.

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The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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