The antifraud measure aims to eliminate the risk of a fraudulent supplier invoicing for work that it has allegedly supplied together with VAT, which it then fails to account for to HMRC. As such, it will put an end to subcontractors receiving VAT payments in most situations, which will likely have an impact on cashflow for businesses in the short term.
With many construction projects came to a halt as a result of the coronavirus pandemic, introducing the changes from October would have come at a difficult time for the sector. The government has therefore taken the decision to delay the measure.
As well as the delay, HMRC also announced an amendment to the policy, which requires end users and intermediary suppliers to notify their sub-contractors of their end-user or intermediary supplier status in writing. This amendment is designed to make sure both parties are clear whether the supply is excluded from the reverse charge.
There are a number of recommended ways in which you can prepare for the reverse charge: