Delay to Value Added Tax reverse charge provides relief for construction industry
Following intense lobbying from the construction industry, HMRC has announced that there will be a one-year delay to the introduction of the VAT reverse charge for the sector.
Now set to be introduced on 1 October 2020, the delay has been welcomed by the industry, as it was warned that construction firms would see a significant change to the management of their finances.
With the primary aim of tackling fraud, the VAT reverse charge is set to prevent businesses in the construction industry from receiving VAT payments from their clients. Instead the responsibility of paying VAT will sit with the client themselves. This is particularly worrying for small businesses, who already must remain vigilant to the possibility of late payments.
With an uncertain future ahead due to Brexit, slow growth and rising construction costs, this was adding to an already worrying time for the construction industry.
Ken McKeating, sales director – Asset Finance at Paragon, said: “The news that this change has been delayed for a year has been well received by the industry however it is now down to the industry, trade bodies, professional advisors and HMRC to make sure that there is a far better level of readiness in a year’s time.
The cashflow implications of the proposed changes could have been catastrophic when combined with other changes in the market created by Brexit.”
HMRC have assured those who have already made amends to their invoice arrangements in preparation will not be penalised, given the change being made at such late notice. The extra year will enable them to fully prepare businesses and provide any guidance needed, ready for the new implementation date.
