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VAT Order – construction services

The VAT (s55A) (Specified Services and Excepted Supplies) Order 2019 comes into effect in relation to supplies made on or after 1 October 2019.

The Order applies a VAT reverse charge to construction services. As a general rule it is the supplier of goods or services who is required to account for VAT on those supplies. However, s55A of the VAT Act 1994 requires the recipient, not the supplier, to account for and pay tax on the supply of any goods and services which are of a description specified in an Order made by the Treasury for that purpose. This is commonly referred to as the reverse charge.

The Order provides the reverse charge will apply to construction services.

Businesses involved in buying and selling construction services are likely to be affected. It does not apply to zero rated supplies of construction services. The policy is an anti-fraud measure. The Order will, for certain supplies of construction services, mean that the customer will be liable to account to HMRC for the VAT in respect of those purchases rather than the supplier.

Practitioners acting for clients in these circumstances should ensure that their clients have taken comprehensive written accountancy advice as to the implications of the Order otherwise their client could be liable for a costly unexpected VAT charge.

For more detail see [2019] 370 Property Law Journal 24.

 

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