HMRC is consulting until 20 July on a first draft of a Treasury order introducing a VAT reverse charge for supplies of construction services to businesses from October 2019. The government announced at Autumn Budget 2017 its intention to legislate for the reverse charge as a means of tackling fraud in construction industry supply chains.
A consultation announced at Spring Budget 2017 examined policy options to tackle fraud on the provision of labour in the construction sector. The government confirmed in its response that it would legislate for the VAT reverse charge, but would not take forward other proposals for changes to the construction industry scheme (CIS).
The draft Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 specifies the types of construction services to be covered by the reverse charge. These are based on the definition of ‘construction operations’ used in the CIS under Finance Act 2004 s 74, and are broadly:
construction, alteration, repair, extension, demolition or dismantling of buildings or structures;
installation of heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection;
internal cleaning of buildings;
painting or decorating internal or external surfaces; and
services integral, or preparatory, to the above.
The reverse charge will not apply to supplies made to customers who are consumers, or to those who use specified supplies to make other supplies, such as selling new houses.
The government expects to publish the final version of the order in October 2018 and the reverse charge will apply to supplies of specified services on or after 1 October 2019.
HMRC is consulting until 20 July on a first draft of a Treasury order introducing a VAT reverse charge for supplies of construction services to businesses from October 2019. The government announced at Autumn Budget 2017 its intention to legislate for the reverse charge as a means of tackling fraud in construction industry supply chains.
A consultation announced at Spring Budget 2017 examined policy options to tackle fraud on the provision of labour in the construction sector. The government confirmed in its response that it would legislate for the VAT reverse charge, but would not take forward other proposals for changes to the construction industry scheme (CIS).
The draft Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 specifies the types of construction services to be covered by the reverse charge. These are based on the definition of ‘construction operations’ used in the CIS under Finance Act 2004 s 74, and are broadly:
construction, alteration, repair, extension, demolition or dismantling of buildings or structures;
installation of heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection;
internal cleaning of buildings;
painting or decorating internal or external surfaces; and
services integral, or preparatory, to the above.
The reverse charge will not apply to supplies made to customers who are consumers, or to those who use specified supplies to make other supplies, such as selling new houses.
The government expects to publish the final version of the order in October 2018 and the reverse charge will apply to supplies of specified services on or after 1 October 2019.
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