The domestic VAT reverse charge

  • The domestic VAT reverse charge 1
The domestic VAT reverse charge is a major change to the way VAT is collected in the building and construction industry.
 
It comes into effect on 1 March 2021 and means the customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier.
 
In practice, this will mean that where there is a chain of contractors/subcontractors working on a building project for example, none of those entities will add VAT to their invoices, other than the main contractor who is invoicing the end user of the property.
 
Guidance is available from HMRC about the VAT domestic reverse charge for building and construction services here.
 
Ultimately, the legislation is likely to mean adaptations are required in the way book-keeping systems are set up in order to be able to deal with this change.
 
If you want further information about how these changes will impact you and your business then please get in touch