VAT Rules delayed for CIS industry for a year

Historically, VAT between subcontractor and contractor has always been invoiced to each other, paid over, and then reclaimed thru HMRC at a later date. HMRC have announced that this VAT exchange will be replaced with a ‘reverse charge’. instead. Meaning no VAT money changes hands other than via the ‘customer’. This was due to come into effect this moth (October 2019).

The government have decided to delay the start of the proposed VAT reverse charge for supplies by sub-contractors in the construction sector to October 2020.

The reason for the u-turn is the lack of awareness of the change that was originally due to start on 1 October 2019. Many sub-contractors, and some main contractors, were not prepared for the changes on top of getting to grips with Making Tax Digital (#MTD) for VAT and consequently the government have decided to delay the start of the new rules for 12 months.

It has also come to light that some of those sub-contractors using the VAT flat rate scheme would be worse off which will require a review of whether that scheme is still worthwhile for them.

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