VAT change coming for construction industry

A new VAT reverse charge will apply to construction or building related services from October 2019.

Under the new rules, a VAT-registered company purchasing certain construction services will be responsible for accounting the VAT to HMRC, rather than the supplier. The reverse charge includes goods where the goods are supplied with the specific services.

The new measures are being introduced to reduce VAT fraud and evasion by placing the responsibility for VAT on the customer. HMRC believe that some small VAT-registered suppliers are charging VAT to their customers, but not then paying the VAT on to HMRC.

The reverse charge mechanism won’t apply in certain circumstances, for instance:

  • If the supplies are zero-rated, including the construction of housing.
  • The customer is an ‘end user’, for instance the property owner or the main contractor who sells a new build to a customer.
  • Where businesses that supply certain services to connected parties within a corporate group structure, or with a common interest in land.
  • The supplier and recipient are landlord and tenant, or vice versa.

Instead, the normal VAT accounting rules will apply to these supplies.


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