A domestic reverse charge VAT is due to come into force on 01 October, but builders are calling for it to be delayed until April 2020.
Under reverse charge VAT, the customer receiving the service will be required to pay all VAT directly to HMRC rather than to the supplier. Additionally, the reverse charge applies through the supply chain where payments are required to be reported through the Construction Industry Scheme.
However, several trade federations, including the National Federation of Builders (NFB) have warned that this will create cash flow issues whilst also adding to administration fees at a time when the costs of labour and materials is on the rise. In a bid to delay the move, the NFB has written to the Chancellor of the Exchequer Sajid Javid.
The letter argues that HMRC’s guidance was issued late and does not answer some of the key questions that those operating within the construction sector need clarity on. It says that both the industry and the government will have time to fully prepare if they delay introducing the charge, allowing for systems to be updated and for the new rules to be properly understood.
‘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.A series of Regional Construction Forums are being held by the NFB around the country in October and November. In attendance will be leading construction tax expert Liz Bridge, who will be offering practical advice on how to deal with reverse charge VAT.