VAT changes in the construction industry welcomed
Changes in the way that VAT is collected in the construction industry have been delayed again but should be welcomed say leading tax and advisory firm, Blick Rothenberg.
Heather Powell, head of property & construction at the firm said: This great news despite the fact that the changes were announced over two years ago, and some members of the VAT community have expressed frustration at this second delay and have suggested that construction companies have had plenty of time to prepare for this change which make main contractors responsible for paying the VAT on services supplied by subcontractors
Heather said “This is very welcome news and HMRC should be congratulated for supporting the industry at this challenging time. The construction industry, which is key to the UK economy, has been badly hit by the coronovirus shutdown. The cash flow impact on businesses has been huge, and addressing the challenges of opening sites and funding the additional operational costs due to the new conditions under which we are all working are critical issues for the finance teams in main contractors– not implementing a new VAT regime.”
She added: “ For subcontractors the relief is even greater – the new VAT regime will tighten cash flow for these businesses as they will not be paid the VAT on their invoices (it is retained by the main contractors as “collection agents” for HMRC) – a 20% reduction in their cash receipts. The cash payments these subcontractors remain the same – to employees and for suppliers of materials. Whilst the VAT receipts are paid to HMRC quarterly they provide working capital for the intervening months – a resource that is in short supply at the moment”.