Tackling fraud in the construction sector

HMRC has published a consultation on policy options to prevent supply chain fraud in supplies of labour provision within the construction sector. In particular it asks for views on a VAT domestic reverse charge and a tightening of the rules on gross payment status within the construction industry scheme (CIS).

A domestic reverse charge would require both parties need to be VAT registered. This is complicated by the variety of providers and customers in the construction sector and also the different rates of VAT that can apply. So unlike other reverse charges HMRC says it is not looking at services which will always be supplied at the VAT standard rate to customers who will always be in business and VAT registered.

One option is to make the main or principal contractor the final recipient of any reverse charge supply so they will be required...