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Domestic Reverse Charge

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Domestic Reverse Charge

The Domestic Reverse Charge is a future change in VAT regulations which will now take effect on 01 March 2021 to help builders affected by the coronavirus crisis

A business supplying construction industry services to a VAT registered customer will no longer be required to account for VAT, with customers dealing with it instead on their own VAT returns.

The new rules could make a huge difference to your cash flow after 01 March 2021. For example, if you invoice another builder for £20,000 on 31 March 2021, you will no longer charge £4,000 VAT which you would most likely collect in April 2021 but not pay to HMRC until 07 August 21, the payment date for your June 2021 VAT return.

The introduction date of 01 March 2021 for the Domestic Reverse Charge is also close to the 31 March 2021 deadline to pay any deferred VAT owed during the coronavirus pandemic. This is potentially a double cash-flow hit.

For further information or guidance on the Domestic Reverse Charge, please do not hesitate to contact Jake on 01227 277667, or by emailing him at j.mackenzie@mphaccountants.co.uk.

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