The introduction of the new VAT domestic reverse charge for construction services, originally due this October, has been postponed until October 2020.

The extended timeframe comes after businesses in the construction sector raised concerns that they would not have enough time to prepare for the tax regime change.

Intended as an anti-fraud measure, the VAT domestic reverse charge will see a major shift in accounting for VAT on some construction services. When it applies, the customer will become the party responsible for accounting for the VAT on the supply made to them. It is a change in ‘B2B’ sales, so does not apply to supplies made to end-users such as domestic purchasers.

In responding to lobbying on the issue from construction associations, HM Revenue and Customs (HMRC) said, “Industry representatives have raised concerns that some businesses in the construction sector are not ready to implement the VAT domestic reverse charge for building and construction on 1st October 2019.

“To help these businesses and give them more time to prepare, the introduction of the reverse charge has been delayed for a period of 12 months until 1st October 2020. This will also avoid the changes coinciding with Brexit.”

HMRC has signalled its intention to spend the intervening year focusing additional resources on identifying and tackling existing perpetrators of VAT fraud, as well as raising awareness of the forthcoming changes to ensure businesses are ready for the new implementation date.