A major change in the way that VAT is collected in the construction industry came into effect on 1 March 2021. Under new domestic “reverse charge” VAT rules, VAT-registered recipients of certain types of building and construction services are required to pay the VAT due directly to HMRC instead of paying it to the supplier. The new rules apply where the “tax point” falls on or after the implementation date, so supplies made under a contract entered into prior to, but invoiced on or after, 1 March 2021 may fall within the new regime. Businesses will need to carefully consider whether services they supply, or receive, fall within the new VAT regime and check that their contracts under which construction services are supplied adequately cater for the new rules.
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