New measures tackle VAT fraud in construction and abuse of the Construction Industry Scheme (CIS) rules.
From 1 March 2021, the VAT domestic reverse charge for supplies of building and construction services changes the way VAT is accounted for in some scenarios. It affects most supplies of building and construction services where both supplier and customer are registered for VAT in the UK, and the supplies are reported within CIS. Please see here for guidance.
Unless last-minute amendments are announced, there will also be change to the CIS rules from 6 April 2021 to 'level the playing field for all within the construction sector'. These give added bite to HMRC powers. HMRC will be allowed, for example, to amend the CIS deduction amounts claimed by sub-contractor companies on their Real Time Information Employer Payment Summary returns, in circumstances where employers don't provide evidence of eligibility and otherwise fail to cooperate with HMRC. In addition, HMRC's penalty powers will be enhanced where false information is given when applying for gross payment status or payment under deduction within the CIS. This could be, for instance, where someone exerts influence or control over a false registration. Finally, there is clarification regarding the cost of materials to be taken into account by a contractor when operating the CIS on a payment to a sub-contractor. The cost is only deductible where directly incurred by sub-contractors to fulfil their own contract with their contractor. We are happy to advise further.