No more delay to new reverse charge for builders

Tax Advisors

The past twelve months have been unique for us all and have presented challenges unlike any we have seen before, especially in business. Many sectors have struggled and whilst there have been changes in the requirements for business in relation to accounting and tax, there are still legal requirements that have to be met.

One sector we have many clients in is building and construction and even before the pandemic hit there were a number of significant changes being implemented by HMRC and whilst these have subsequently been delayed they are still happening. A key example of this is new VAT rules for the construction supply chain.

New VAT rules for the construction supply chain.

New rules were supposed to apply to construction businesses that buy and sell services as part of a larger supply chain from October 2019. However, these were delayed twice. What’s the latest?

The new reverse charge for builders is aimed at preventing “missing trader” VAT fraud in the construction industry. This is where a contractor charges another business output tax, but then disappears without making good the tax to HMRC. The new rules will mean that builders no longer charge VAT on invoices they issue to other VAT-registered construction industry customers. The customer will instead declare the VAT on their own returns and claim input tax as well, i.e. a self-accounting entry. As VAT is not being paid to builders, they cannot disappear and deprive HMRC of the tax in question.

The rules were supposed to come into force on 1 October 2019, but were delayed by twelve months in order to give businesses more time to prepare. It was then delayed for a further five months due to the pressures caused by coronavirus during 2020. Following the UK going into a third national lockdown, some expected a further delay to be announced, however, the government has confirmed that the changes will indeed come into effect from 1 March 2021.

All VAT-registered businesses in the construction industry will need to consider whether the new rules apply to their supplies from that date. Use HMRC’s updated guidance here to check if you need to do this.

R&D Tax Refunds

The team at Charterhouse has been especially busy over the past year advising our clients in the construction sector in respect of how they might obtain a significant tax refund as a result of their day to day business activities qualifying as Research and Development, let us assess whether we can help you in this regard.

At Charterhouse we work with our clients providing a full range of accounting and financial services including ongoing accounting needs and producing management accounts, helping your business build its profitability and maintain it. To be fully in control, you need information on what is happening to your business now, not what happened weeks or months ago and we can help to give you this.

For a free initial consultation to find out how we can help you with all your tax requirements as well as your management accounting and other accounting services contact us or call 020 8863 4566.


020 8863 4566