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UK to implement domestic reverse charge on construction services as of 1 March 2021

The new United Kingdom (UK) Value Added Tax (VAT) domestic reverse charge is expected to be introduced with effect from 1 March 2021 (following two delays, most recently as part of HM Revenue & Custom’s (HMRC) COVID-19 measures). The reverse charge will apply to supplies of construction services between VAT-registered subcontractors and contractors, which must be reported for Construction Industry Scheme (CIS) purposes.

The aim of the new legislation is to tackle perceived VAT fraud in the construction sector known as “missing trader fraud,” whereby VAT is charged by the supplier but is not remitted to HMRC.

Source EY

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