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The Reverse Charge: VAT and the construction sector
The Reverse Charge: VAT and the construction sector
Policy & Sectors 03rd Oct 2019

The Reverse Charge legislation for the construction sector has been slowly making its way through Parliament since 2017. The government has recently announced that the introduction of the VAT Reverse Charge will be delayed until 1 October 2020.

The Reverse Charge will alter the responsibility in the construction sector for how businesses pay and report VAT on services.

The REC team has been corresponding with HMRC for some time about whether the Reverse Charge will apply to recruitment services. For our members in the construction sector this is obviously a concern. However, we have been speaking with HMRC over recent months and they have told us that the Reverse Charge will not apply to recruitment services.

Why is it being brought in?

The remit of the Reverse Charge is to tackle what the HMRC calls ‘missing trader’ fraud. This involved businesses charging VAT for services provided and then disappearing without paying that VAT to HMRC.

How does it work?

The charge works by shifting the responsibility for the declaration and payment of VAT for services from the service supplier to the recipient of the services. It will be applied to all construction services and includes the cost of materials.

What about recruiters?

The Reverse Charge will apply to construction services and will affect businesses registered for the Construction Industry Scheme (CIS).  Many recruiters are registered for CIS but they do not provide construction services – rather, they provide recruitment services to the construction industry. 

That said, we understand that some clients have already told REC members that they will apply the VAT Reverse Charge to their invoices. 

The REC has been speaking with HMRC over recent months and they have repeatedly told us that the VAT reverse charge does not apply to the supply of labour in the construction sector. Whilst the legislation does not specifically state this, HMRC’s Employer Bulletin for August states that the reverse charge "does not include supplies of staff or workers by employment businesses". 

For more information contact Chris Hartley in the Policy team via or follow him on Twitter @CHrtly.

Christopher Hartley
Christopher Hartley - Policy Advisor
View More articles by Christopher Hartley >

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