In the UK, while things are gearing up to get more complicated on pretty much all fronts, the tax authority sought to provide clarity certain aspects of the VAT rules, including with regard to the new reverse charge regime for the building and construction industry, now set to come into force in March 2021. (Originally due to be in place from October 2019, the measure had been postponed to October 2020. But now here we are, so…)

HM Revenue and Customs released three publications offering in-depth guidance on the introduction of the VAT reverse charge mechanism on the supply of building or construction services.

Under the new regime, in order to remove the possibility of “missing trader” fraud, a VAT-registered business which supplies certain construction services to another VAT-registered business for onward sale will be not be required to account for VAT, but must issue an invoice stating that the service is subject to a domestic reverse charge.

The recipient of the supply must account for the VAT due on the supply through its VAT return, instead of paying VAT to the supplier. The recipient may also recover that VAT amount as input tax, subject to the normal rules for claiming credit.

For businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing that they are end users or intermediary suppliers.

For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look

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