After numerous delays, the VAT reverse charge on construction and building services comes into force on Monday 1st March 2021. The new rules will see changes to how VAT is collected in the sector.
VAT-registered subcontractors performing qualifying ‘construction operations’ will no longer charge VAT on its services to main contractors. From Monday, it will be the main contractor’s responsibility to pay the VAT to HMRC on the subcontractor’s behalf.
ICAEW’s Tax Faculty has issued some advice for VAT-registered construction firms who are liable for the charge. They should have:
- Procedures in place to ensure there is an agreement between suppliers and customers over their status and the correct treatment of VAT
- Updated accounting systems to ensure that the correct invoicing procedures are in place
- An effective way to manage the impact of the new rules on business cashflow