In his Spring Budget the Chancellor announced that a consultation to crack down on the increasing level of VAT “missing trader” fraud in the construction sector would take place. The fraud generally involves VAT debts accruing in a company which supplies labour services before that company goes “missing” without accounting for the VAT.

The consultation was published on 20 March 2017 and invites responses from construction businesses and those that supply predominantly labour services to those in the construction sector.

The consultation will consider a range of policy options to prevent supply chain fraud in the sector. In particular, it will consider applying a reverse charge mechanism so that those paying for a subcontractor’s work must account for VAT having been paid and whether changes should be made to the qualifying criteria for gross payment status within the Construction Industry Scheme.

Subject to the consultation, the Government’s intention is to legislate for this in Finance Bill 2017.

The closing date for responses is 9 June 2017 and should be sent to indirecttax.vatsncfteam@hmrc.gsi.gov.uk.

A copy of the consultation document can be found here.