Welcome for delay to new VAT reverse charge

09-Sep-2019

The Chartered Institute of Taxation (CIOT) has welcomed today’s announcement that construction firms will get an extra year to prepare for a major change in accounting for VAT.

The CIOT had written to HMRC in July setting out its concerns about the construction industry’s readiness for the new VAT reverse charge that was scheduled to be introduced from 1 October 2019 and requesting a delay. Some 150,000 businesses in the construction and building sector will be affected by the change. The CIOT hopes the delay to 1 October 2020 will lessen the likely flurry of disputes between suppliers and customers as to whether or not VAT should be charged.
 
A recent survey by the Federation of Master Builders had indicated that 69% of construction SMEs surveyed had not even heard of the new reverse charge. CIOT members had reported a similar lack of awareness among SME construction businesses.
 
Linda Skilbeck, vice-chair of CIOT’s Indirect Taxes Sub-committee, said:
 
“Today’s announcement is good news.
 
“There is substantial evidence of a lack of awareness of this change, and a lack of preparedness even among those businesses who are aware of it.
 
“If the government had pressed ahead with a start this October we envisaged significant confusion amongst businesses, leading to disputes between suppliers and customers as to whether or not VAT should be charged. It would have led to an additional influx of calls to HMRC’s phone lines, while HMRC and its call centres were already busy dealing with the implementation of Making Tax Digital, as well as the consequences of Brexit.
 
“A start date of October 2020 is more sensible. This should allow time for a dedicated information campaign to be operated by HMRC, with the assistance of industry and professional bodies. Such a campaign could include direct communications with businesses in the sector, particularly those registered for the Construction Industry Scheme, as well as improvements to the content and accessibility of guidance on GOV.UK.”