HMRC has confirmed that the construction industry anti-VAT fraud provisions will only apply to positive VAT-rated services (i.e. 20% or 5%), where payments are required to be reported through the Construction Industry Scheme (“CIS”). This update from Deloitte summarises the detail.
This change will be effective from 1 October 2019, and addresses the concerns regarding potential difficulties in identifying whether construction services supplied to non-construction businesses would have been subject to the reverse charge.
Other key points are as follows:
- the definition of ‘construction services’ closely follows the CIS legislation
- end users will be excluded from the scope of the provisions (and those connected to an end user who is making an onward supply to that end user, should also be considered as an end user)
- where there is a mixed supply (with an element being subject to the reverse charge), then the whole supply should be subject to the reverse charge i.e. no apportionments should be made
- where reverse charge supplies have been made to a customer on a specific site, if the parties agree, further supplies to the same customer on the same site can also be treated as reverse charge supplies
- no formal certification will be required by an end user, but the onus will be on it to make the supplier aware in writing that it is an end user (and it will be responsible for self-accounting for VAT on affected supplies in any case).
HMRC recently published final policy note, explanatory memorandum, and statutory instrument in respect of the forthcoming domestic reverse charge on construction services. We expect more detailed guidance to be published ahead of the 1 October 2019 start date, but in the meantime, the current guidance can be found here.