VAT – Important Changes in the Construction Industry

VAT – Important Changes in the Construction Industry

HM Revenue & Customs have announced that they are consulting until 20 July 2018 on a draft Treasury order introducing a domestic VAT reverse charge for specified business-to-business supplies of construction services from October 2019.

The proposed changes were announced in the 2017 Autumn Budget. The intention is to introduce the reverse charge as an anti-fraud measure.

The proposal will not affect zero-rated works such as the construction of new dwellings; but will apply to business to business taxable supplies at a positive rate of VAT. Therefore, not only will most works to existing dwellings and commercial property be subject to the legislative changes; but also works at the reduced rate such as conversions involving the change in the number of dwelling units, or works to dwellings that have been empty for at least two years.

Supplies to consumers will not be affected.

The changes will result in the business recipient of such services accounting for the output tax rather than the supplier. Depending on the taxable status of the recipient and subject to normal rules, the recipient would also be able to reclaim up to 100% of this VAT as input tax in the same VAT period.

The proposal is that the legislation will come into effect on 1 October 2019. A link to the relevant web page is below.

If you wish to discuss the matter or wish to respond to HMRC’s consultation, please contact Ian Marrow at: or 01245 254219

Ian Marrow

VAT Associate