Tag Archives: VAT Return

COVID-19: Deferring VAT and Income Tax

The government has announced that they will support businesses during COVID-19 by deferring VAT and Income Tax payments.

VAT will be deferred for 3 months starting from 20 March 2020 until 30 June 2020 and the self-employed will have their Self Assessment advance payment due in July 2020 deferred to January 2021.

All UK businesses and self-employed individuals are eligible to take advantage of the tax deferrals which are automatic and do not require applications.

During the deferral period HMRC will not charge any penalties or interest for late payment.

COVID-19: Deferring VAT and Income Tax

Businesses and Individuals in Temporary Financial Distress

All businesses and individuals in temporary financial distress as a result of COVID-19 can also participate in HMRC Time to Pay offer, see our VAT PAYE and Corporation Tax Help for Covid-19

This post on COVID-19: Deferring VAT and Income Tax payments was sponsored by Canalitix.com

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Fraud and the VAT Reverse Charge

This article entitled Fraud and the VAT Reverse Charge is meant to provide an insight into the changes coming into force on 1 October 2020.

HMRC considered fraud prevention as the primary reason for introducing the VAT reverse charge to the construction and building services industry. The VAT Reverse Charge which was initially planned for 1 October 2019 comes into force on 1 October 2020. This delay was to allow construction industry services (CIS) participants and accounting systems developers sufficient time to be prepare for the change.

This change means that CIS contractors / customer receiving the service will be responsible for paying the VAT due to HMRC instead of the subcontractor / supplier. The subcontractors’ invoices will carry a note stating that the VAT should be paid by contractors to HMRC.

While some contractors may find themselves with cashflow issues at the start of the reverse charge, some subcontractors may find themselves reclaiming VAT on purchases. This is a direct result of shifting the responsibility for payment of VAT on the subcontractor sales invoices onto the CIS contractor.

Fraud and the VAT Reverse Charge

Preparing for the reverse charge
Accountant and their clients need to ensure that they are prepared for the 1 October 2020 introduction by:
1. Verifying whether sales and/or purchases are in scope for the reverse charge
2. Ensuring that accounting systems have been updated to deal with the reverse charge
3. Budgeting for the cash flow implications of paying the reverse charge
4. Providing staff training

Who are excluded from the reverse charge
1. End users (consumers and intermediaries)
2. Professional services of architects and surveyors
3. Extraction of minerals
4. Drilling for oil and gas
5. Repair of building service components
6. Supplies of staff or temporary workers provided by employment businesses who are responsible for paying them. However, if an employment business contracts to deliver a specific construction service, such as installation of windows the reverse charge applies.

By shifting the burden of VAT payment to CIS contractors, HMRC anticipates that the level of VAT fraud will be reduced in the building and construction industry when the reverse charge comes into force on 1 October 2020.

Useful links

Domestic reverse VAT charge for building and construction services