Implementation of VAT reverse charge delayed

Contractors now have extra time, until 1 March 2021, to prepare for the VAT Reverse Charge.

With the impact of Covid-19 resonating throughout the industry, it is perhaps no surprise that the government has, again, delayed the implementation date for the new VAT reverse charge.  It was planned for 1 October 2020, but this has now been postponed for a further 5 months to 1 March 2021.

The benefits

This will be a welcome relief for many in the construction industry. The additional time will allow furloughed workers to get back up to speed with the proposed changes. The postponement also means that the inevitable cashflow implications for contractors from the VAT reverse charge will be delayed.

An additional requirement

Another change is that there will be an additional requirement for anyone claiming the exception to the VAT Reverse Charge (either because they are an end user or intermediary) to notify their sub-contractors in writing as to their claim for the exemption. This is so that there is clarity between all parties on how the payment of VAT is to be treated. 

Even with this new delay, contractors should continue to take preparatory steps to ensure that they are compliant with the new rules when the time comes.