From 1 October 2019, a domestic reverse charge regime will become applicable to certain construction services. The new domestic reverse charge will apply to supplies such as construction, alteration, repair, extension, painting and decorating, as well as the demolition of buildings, installation of heating, lighting and air-conditioning.
The reverse charge regime will apply to construction services for onward sale. In other words, sales of construction services to another VAT-registered business for onward sale. Under the regime, the recipient must account for the VAT due on that supply through its VAT return, instead of paying the VAT amount to the supplier. The recipient may recover that VAT amount as input tax, subject to the normal rules.
Businesses in the construction industry should take note of how the regime may affect them.