Building industry welcomes delay on VAT change

The Government’s decision to delay by one year the implementation of potentially damaging VAT changes for construction companies is a victory for common sense, according to the industry.

Reverse charge VAT was due to come into force from 01 October 2019 but the Government has announced it will delay it until 01 October 2020 after a coalition of construction organisations, wrote to point out the damaging impact the policy would have on the sector.

‘I’m pleased that the Government has made this sensible and pragmatic decision to delay reverse charge VAT until a time when it will have less of a negative impact on the tens of thousands of construction companies across the UK,’ said Brian Berry, chief executive of the Federation of Master Builders (FMB).

‘To plough on with the October 2019 implementation could have been disastrous given that the changes were due to be made just before the UK is expected to leave the European Union, quite possibly on No Deal terms. The situation hasn’t been helped by the poor communication and guidance produced by HMRC,’ he pointed out.

‘Despite the best efforts of construction trade associations to communicate the changes to their members, it’s concerning that so few employers have even heard of reverse charge VAT,’ he explained. Indeed, according to research by the FMB published in July, more than two thirds had not heard of the VAT changes and of those who had, around the same number hadn’t prepared.

‘It is reassuring that the Government has listened to the construction industry, which has come together to make clear to the Government that sticking to the October 2019 timetable could lead to a loss of productivity, reduced cash flow and in the worst cases, lead to a hit on jobs, tipping some companies over the edge,’ Berry added.

‘What’s required now is for the Government and industry to work together to deliver a sector wide communications campaign, which must include plain English guidance on the changes. We also want to work with the Government to deliver workshops aimed at construction employers, held in locations across the country, to explain what’s happening and why,’ he concluded.

The National Federation of Builders (NFB), also welcomed the delay. ‘Contractors and sub-contractors weren’t ready for reverse charge VAT and we are delighted that the Government has listened to our industry campaign to seek a delay,’ said Richard Beresford, chief executive of the NFB.

‘The Government has given us double the time we recommended and this will help us work together to set up improved online guidance, hold workshops and make sure the entire industry understands what reverse vat charge means for their business,’ 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.