With just weeks to go, the government has delayed the introduction of the reverse charge VAT changes until October 2020.
Reverse charge VAT was due to come into force for the construction industry from 1st October 2019. The government has announced the delay, stating that ‘industry representatives have raised concerns that some businesses in the construction sector are not ready to implement the VAT domestic reverse charge for building and construction…To help these businesses and give them more time to prepare, the introduction of the reverse charge has been delayed for a period of 12 months until 1 October 2020. This will also avoid the changes coinciding with Brexit’.
The move has been described by the Federation of Master Builders (FMB) as a ‘victory for common sense’.
Brian Berry, chief executive of the FMB, said: “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. 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 EU, quite possibly on ‘no-deal’ terms. The situation hasn’t been helped by the poor communication and guidance produced by HMRC. 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. 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 cashflow and in the worst cases, lead to a hit on jobs, tipping some companies over the edge. 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.”