Major changes to VAT rules for the construction sector
The VAT rules on construction services are changing from October 1st for contractors and sub-contractors.
A VAT reverse charge is being introduced, which means that VAT will need to be handled and paid in a different way.
The contractor (customer) will have to pay the VAT due instead of the sub-contractor (supplier). The new rules apply to individuals or businesses registered for VAT, not to consumers.
The changes are being implemented as a response to missing trader fraud and will prevent losses estimated at around £100m per year.
Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “The scope of services covered is wide ranging. Construction firms will need to change their accounting systems radically to accommodate the new system.
“There isn’t much time left to act. We’d urge construction businesses to look at the information online and, if they’re still unsure, consult their accountant.”
HM Revenue and Customs (HMRC) has published guidance, which includes information on how to mitigate cash-flow impacts.
It promises to operate a “light-touch” enforcement regime in the first six months and will assist businesses that attempt to comply but are struggled for genuine reasons.
Its Business Payment Support Service is aware that some businesses may require assistance with paying their taxes as a result of the loss in cash flow.
Any assistance will depend on the specific circumstances of individual cases but might include granting businesses more time to pay the tax they owe or arranging an instalment plan. More details here.
Traders who have further concerns or questions can contact HMRC directly at indirecttax.vatsncfteam@hmrc.gov.uk
© Cumbria Chamber of Commerce