HMRC has announced that the introduction of the DRC for construction services will be delayed for a further period of 5 months from 1 October 2020 until 1 March 2021, citing the impact of the coronavirus pandemic on the construction sector.

There will also be an amendment to the original legislation, to make it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform contractors in writing of this status.

The DRC is an anti-avoidance measure designed to remove the potential scope for VAT on construction services being ‘stolen’ from HMRC by unscrupulous contractors. The measure is designed to shift the accounting for VAT on supplies of construction services in certain circumstances onto the customer rather than the supplier.

NHS bodies are likely to be end-users in the majority of cases and given the requirement to inform contractors of this status, there is no ‘do nothing’ option. You will still need to prepare for implementation from March 2021 and getting this wrong could give rise to penalties. CRS VAT will provide further updates on the DRC and how it affects the NHS in the coming months. This will include working with clients to implement the changes and running seminars.

If you would like to read more, HMRC has published a new Revenue and Customs Brief (7/2020) about this, which can be found here:

Should you have any questions on the DRC and how it will affect your organisation please contact us.