Following last week's announcement that the new domestic reverse charge to be implemented for certain construction services will, again, be delayed – this time from 1 October 2020 to 1 March 2021, regulations have been published setting out more detail.
The further postponement is intended to help businesses during the Covid-19 pandemic, in recognition of the adverse effect that implementation of the new rules will have on cash flows (as affected businesses will no longer receive VAT from customers where the reverse charge applies). It will also give businesses more time to adapt their accounts systems for the new rules, at a time when this will clearly not be their focus.
To give more clarity as to the operation of the rules in practice, there will be a new requirement that, for businesses to be excluded from the reverse charge because they are end-users or intermediary suppliers, they must inform the supplier in writing. Importantly, this must be either (i) no later than the time of the supply or (ii) the recipient must have received the supply in pursuance of a written agreement in which it has confirmed that it is outside the scope of the reverse charge (see (the rather niftily named) The Value Added Tax (section 55A) (Specified Services and Excepted Supplies) (Change of Commencement Day and Amendment) (Coronavirus) Order 2020). This change is intended to remove an industry concern that HMRC may seek to challenge the reverse charge treatment, where a business that qualified as an end-user or intermediary supplier had not given notification and, as such, should be welcomed. The guidance is to be updated in the near future to reflect this.
Meanwhile, the government take the opportunity to make it clear that they are not lightening up on their efforts to prevent fraud in the sector.