Builders are calling for the introduction of domestic reverse charge VAT due to come into force on 01 October to be delayed until April 2020.
Reverse charge VAT means that the customer receiving the service will have to pay the VAT to HMRC instead of paying the supplier. The reverse charge applies through the supply chain where payments are required to be reported through the Construction Industry Scheme.
But the National Federation of Builders (NFB), together with other trade federations, has highlighted the effect the change will have on cash flow and administration costs for an industry already facing increased material and labour costs.
The NFB has written to the Chancellor of the Exchequer Sajid Javid to ask for the move to be delayed.
It says that the guidance issued by HMRC was delivered late, is not clear and leaves some questions unanswered. A delay before introducing the charge would give the industry and government time to properly prepare the industry to understand the changes and update systems.
‘For an industry facing lighter workloads, increasing pressure on cash flow and an already high rate of insolvency, reverse charge VAT could not have come at a worse time,’ said Richard Beresford, chief executive of the NFB.
‘By delaying the introduction of this measure, the industry will have more time to properly prepare and make their businesses more resilient, and more detailed guidance can be provided to ensure a smooth introduction,’ he added.
The NFB is holding a series of Regional Construction Forums around the country in October and November 2019. Leading construction tax expert Liz Bridge will be offering practical advice on how to deal with reverse charge VAT.
