VAT REVERSE CHARGE – IMPORTANT UPDATE FOR THE CONSTRUCTION INDUSTRY
From 1st October 2019 HMRC will implement the new reverse charge system for VAT accounting within the construction sector.
The changes mean that suppliers of goods or services in the construction industry will no longer be involved in the payment of VAT to HMRC.
Why are HMRC implementing these new rules?
HMRC are making this change in an attempt to tackle VAT fraud.
The new rules aim to prevent the situation where the contractor pays the sub-contractor the price plus VAT for services, but the sub-contractor then fails to account for the VAT to HMRC.
Who will be impacted by the changes?
The new reverse charge will apply to construction services that are currently covered by the Construction Industry Scheme (CIS). It will apply to B2B supplies of those services between VAT-registered businesses where the recipient then makes an onward supply of the same construction services.
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