HMRC has confirmed that the planned introduction of the VAT domestic reverse charge for construction services has been delayed further from 1 October 2020 to 1 March 2021, due to the impact that coronavirus has had on the construction sector. The change was initially due to be implemented from 1 October 2019 but was deferred for a period of 12 months, as industry bodies expressed their concerns around the lack of preparation and therefore, the potential negative impact on businesses. There has also been an amendment to original legislation, laid in April 2019, which means that it is mandatory for businesses who are excluded from the reverse charge because they are end users or intermediary suppliers to inform their sub-contractors in writing of this fact. The rationale behind this is to ensure that both parties are aware whether the supply is excluded from the reverse charge. The new rules relating to the domestic reverse charge mean that UK customers who get supplies of construction services must account for the VAT due on these supplies within their VAT return, and pay the VAT owed straight to HMRC, as opposed to the UK supplier. This will prevent criminals from stealing the VAT that is due to HMRC and it is hoped that the changes will work to significantly reduce fraud in the sector. HMRC will update reverse charge guidance to accommodate the change to the implementation date and also the requirement for end users and intermediary suppliers to inform suppliers where they want to be excluded from the reverse charge.
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CIPP Survey: Tackling abuse within the Construction Industry 12 June 2020
To support the CIPP’s written response to HMRC’s consultation on potential changes to the rules to prevent tax loss from the operation of the Construction Industry Scheme (CIS), the Policy team has designed a survey.
The survey aims to collect views and feedback on proposals to grant HMRC a new power to correct CIS deduction amounts claimed via Real Time Information (RTI) and on changes to existing rules, hopefully identifying any additional adjustments that could be made to tackle abuse of the CIS. The survey also asks for opinions relating to early ideas around construction supply chains. The government recognises that most of the businesses within the construction sector meet their CIS obligations, in full and on time, however there are a minority of business that are abusing the rules by extracting cash from the tax system to falsely reduce their tax liabilities. By doing so, it allows them to gain an unfair cash-flow advantage over their competitors. From April 2021, HMRC will have the power to correct the amount of CIS deductions claimed on a sub-contractor employer’s return where they are identified as, or suspected of, claiming inaccurate amounts. Clarification on the law regarding “material deductions’ and ‘deemed contractors’ will also be implemented.
A new provision will be introduced which will allow HMRC to correct the CIS deduction figures on a contractor’s EPS submission where there is no satisfactory evidence to support the claim.
As well as correcting the EPS figures, HMRC will prevent the employer from the offset of further CIS deductions, against their employer liabilities, for the remainder of the tax year. Consideration to continue off-setting, after a correction has been made, will be made if an employer, after the event, provides evidence to support CIS deductions suffered. HMRC will apply interest and late payment penalties where the employer is late paying over corrected amounts. Employers will be expected to make payments which are due, on their next PAYE payment, following the correction. Payments will be due to be made on payment of PAYE following the correction. The CIPP recognises that, particularly at present, payroll professionals are extremely busy individuals, and would really appreciate it if you could spare the time to complete the survey to feed in to the future of the operation of the CIS, and to have your say. The survey will take approximately 20 minutes to complete, and will close at 23:45 on 31 July 2020.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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