Q&A: Reverse VAT

摘要

Why is the domestic reverse VAT charge being introduced? HMRC has been experiencing substantial levels of fraud from criminals who have taken control of subcontractors within the construction industry. They have been VAT registered, so charging VAT on their invoices to contractors, but have then disappeared without paying this VAT over to HMRC. This is a type of 'missing trader' fraud which has cost the UK government many millions of pounds. The 'reverse charge' system is designed to combat this. How will the VAT charge work? From 1 March 2021, subcontractors in the UK construction industry will no longer add VAT to their invoices when working for other contractors. Instead they will just indicate on the invoice that the VAT needs to be dealt with by their customer - the main contractor - under the 'reverse charge' system. Their customer will enter the VAT amount on their VAT return as if they had raised the sales invoice, as well as entering it on their VAT return in the normal way.