COVID-19 update – 8 June – CJRS and VAT charge for construction

Reverse VAT charge for construction postponed to 2021

The government has announced a further five-month delay to the introduction of the domestic reverse VAT charge for construction services due to the impact of coronavirus.

The reverse charge for VAT on construction services was originally due to come into force on 1 October 2019, but its introduction was later pushed back until 1 October 2020. Find out more about the reverse charge for VAT on construction services here.

In a brief, published on 5 June, HMRC confirmed that the anti-fraud measure is now being postponed until 1 March 2021 in light of the coronavirus pandemic.

A reverse-charge system requires a VAT-registered customer to account for the VAT due when buying certain services from its suppliers. The customer pays the VAT due to HMRC by making an adjustment to its VAT return rather than paying the VAT to the supplier.

The advantage of a reverse charge is that there is no risk of a fraudulent supplier invoicing for work that it has purportedly supplied together with VAT, which it then fails to account for to HMRC.

The introduction of the reverse-charge system necessitates changes to agreements between customers and suppliers, updates to accounting systems (including invoicing procedures) and will impact on the business’ cashflow. Given that 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.

In addition to the delay in implementation, Revenue and Customs Brief 7 also announced a change to the legislation when it does come into force. For businesses to be excluded from the reverse charge, as they are end-users or intermediary suppliers, they must now inform their sub-contractors in writing that they are end-users or intermediary suppliers.

CJRS Updates

Further to our recent update on CJRS and ahead of the new rules being clarified on 12 June, a couple of key points were announced in a recent HMRC employer bulletin:

For periods starting on or after the 1 J‌ul‌y, the maximum number of employees you can claim for in any period cannot be higher than the maximum number you have claimed for in a previous period. For example, if your highest single claim for periods up to 30 June was for 100 people, you can’t claim for more than this number in later periods.

Making changes to your claims if you have over-claimed

If you’ve made an error in a CJRS claim that means you received too much money, you must pay this back to HMRC.

We’ve updated the application system so you can tell us if you have over-claimed in a previous claim – when you apply you’ll be asked if you need to reduce the amount to take account of a previous error. Your new claim amount will be reduced to reflect this. You should then keep a record of this adjustment for six years.

If you have made an error in a CJRS claim and do not plan to submit further claims, we are working on a process that will allow you to let us know about your error and pay back any amounts that you have over-claimed. We will update guidance and keep you informed when this is available.

They haven’t yet announced a system for those who under-claimed…

And remember, be extra vigilant during this period for scams claiming to be from Gov.uk or HMRC

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