New VAT reverse charge mechanism for construction services coming into force on 1 October

5 September, 2019
by: Cripps Pemberton Greenish

The UK government loses around £100m a year from construction companies failing to account to HMRC with accurate VAT revenues.  As a result, it has decided to combat this type of fraud by introducing a new VAT reverse charge mechanism for construction services, which will come into force on 1 October.

The effect of these regulations is that recipients of construction services will need to pay fees to the provider of the services net of tax (save where such payments are within the exclusions defined in the legislation) and account to HMRC for the VAT separately.  This will have a significant impact on parties up and down the development chain.  Details are outlined in our guidance note linked here.