Call for government to delay VAT reverse charging

The Building Engineering Services Association (BESA) joined with key industry bodies, collectively representing thousands of construction companies, in a letter to Chancellor of the Exchequer Sajid Javid calling on the Government to delay the proposed introduction to VAT Reverse Charging by six months until April 2020.

HMRC plans to introduce VAT Reverse Charging on the majority of construction related services from 1 October 2019. Companies who are VAT registered and Construction Industry Scheme registered will no longer pay VAT to the majority of their subcontractors. VAT will only be paid to firms who supply only labour (employment businesses) and to the merchants and businesses that sell building materials only without any fix.

SNIPEF has described this new policy as having a significant negative impact on the industry, further increasing the burden on construction employers and seriously restricting cashflow in an industry that already suffers from late payment.

BESA argues that the planned October introduction the VAT changes, already expected to increase burden and restrict cashflow for many businesses, would pose a bigger shock to the industry because the timing would coincide with the UK leaving the EU and a possible no-deal Brexit.

Businesses will need to understand and be prepared for these changes to prevent being caught out during the transition, regardless of when it occurs.

SNIPEF CEO Fiona Hodgson says: “We are extremely worried about the impact of the impending changes to reverse VAT and the subsequent affect it will have on SNIPEF members.

“Many businesses in the construction industry are already suffering due to rising material prices, high labour costs associated with skill shortages not to mention payment issues. The introduction of the reverse charge VAT will only add to this burden, particularly for small contractors that may be forced to shut down if they do not have the resources to cope with the proposed change in legislation.

“The Government have introduced this change with little or no consultation and need to listen to the industry and at the very least delay the implementation of the charge.”

Head of legal and commercial services at BESA, Debbie Petford, says: “We know keeping on top of changes can be challenging for many businesses which is why BESA members benefit from easy access to practical resources and advice from our legal team.

‘BESA members receive regular guidance through monthly tax bulletins as well as template letters and invoices we have prepared to ensure their supply chains are proactively informed well before October.’

Members of BESA can access the guidance online here and a webinar here.

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