V3.234 Domestic reverse charge for construction services
This paragraph examines measures in place to combat so-called 'missing trader fraud' specifically in the construction sector, which came in to force from 1 March 2021. The reverse charge in connection with missing trader fraud and other anti-fraud reverse charge measures are covered generally in V3.233. Broadly, such fraud involves a 'missing' or 'defaulting' trader deliberately failing to pay its VAT liability for taxable supplies made in the UK. Frequently, such fraud involves supplies passing through a number of intermediary traders before either being sold to a UK end user of a customer outside the UK1.
Background to domestic reverse charge for construction services
In the Autumn 2017 Budget, the Government announced that it would publish a technical consultation on draft legislation for a VAT reverse charge on construction services in Spring 2018. The consultation2 was published on 7 June 2018 and ran until 20 July 2018. A final draft of the legislation and guidance was published on 7 November 20183, and the legislation itself (SI 2019/892) was made on 29 April 2019.
The measure applies the reverse charge to shift responsibility for paying the VAT along the supply chain to remove the opportunity for it to be stolen. It was originally scheduled to take effect from 1 October 2019. However, there were serious concerns over the preparedness of the construction industry for the change4 and, as a result, HMRC announced in Revenue and Customs Brief 10/195 that the implementation would be delayed for a
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