Stricter Reverse Charge from September

August 24, 2021

Reverse Charge VAT changed how cash flows through the supply chain as subcontractors no longer charge VAT. Instead, only the firm at the top of the supply chain will charge VAT to the end client, which will then be paid to HMRC.

The changes came into force at the beginning of March 2021, with HMRC being lenient in dealing with any errors made in the first 6 months of the new legislation, as they understood that implementing the reverse charge may cause some difficulties.

Any errors should have been corrected as soon as possible, as the longer under declared or overcharged sums remain outstanding the more difficult it may be to correct or recover them. HMRC officers assessed for errors during the light touch period, with penalties only being considered if you were deliberately taking advantage of the measure by not accounting for it correctly.

As of the start of September, HMRC’s light touch period will end and companies will be expected to apply reverse charge vat correctly. We recommend that if you have any doubts, do not hesitate to contact HMRC.

Click here to see the flowchart to help decide if you should apply normal VAT rules or to apply the domestic reverse charge.

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