Extension of the Security Deposit Legislation from April 6th 2019.
What is it?
The Security Deposit Legislation is something that has historically been implemented by HMRC but, so far has not been extended to include the construction industry until now.
The Security Deposit legislation allows HMRC to require a deposit or bond that is to be paid by the tax payer where HMRC believes there may be a risk of non-compliance.
An extension into the Construction Industry Scheme would mean that individuals or companies, inspected by an HMRC officer, would have to make a security payment to HMRC for the amount of CIS deductions that the person is or may be liable to pay HMRC, as this would be “necessary for the protection of revenue”
According to the consultation document, securities will be;
“targeted specifically at high risk businesses that have historically failed to comply with their tax obligations, or where those behind the business are connected with previous business failure that resulted in loss of tax”
Where a company is required to provide a security, the Regulations may allow HMRC to include the company’s directors and officers as liable persons.
Taken from the consultation document, the government proposed to introduce a VAT domestic ‘Reverse Charge’.
‘This means that the customer in the transaction becomes responsible for accounting for the VAT.
The supplier will never obtain custody of the tax due and hence cannot steal it.
With an estimated 300,000 businesses, the construction sector is much bigger and more complex than other sectors in the UK where reverse charges have been deployed in recent years.’
The government listened to stakeholder concerns about the impact on legitimate businesses and will ensure:
a long lead-in time – for businesses to make necessary adjustments to their accounting and IT systems. The measure will only take effect in October 2019.
sales to the final business or domestic customer are out of scope of the VAT reverse charge. This will reduce complexity for developers without reducing the measure’s effectiveness.
there will be no threshold to avoid creating considerable complexity for businesses and offering fraudsters a means to avoid the measure.
For more information and a no obligation discussion on this matter, give us a call on 0333 121 2001.
Published: 4th December 2018