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Calls for government to delay construction VAT changes

09 August 2019

Trade bodies representing the construction industry have written to the government to call for the implementation of reverse charge VAT to be delayed for at least six months.

Addressed to Chancellor Sajid Javid, the letter cites a number of reasons to justify the call for delaying the changes to the VAT system.

These include coinciding with the UK's date to leave the EU, particularly if there is no trade deal in place, which is looking increasingly likely.

Introducing reverse charge VAT will additionally place another burden on construction companies faced with other challenges such as material price rises, increased pension contributions and skills shortages.

Additional impacts could include lower productivity, reduced cashflow and companies forced out of business, the letter says.

The introduction of reverse charge VAT by HMRC will have particular effect on smaller businesses in the supply chain, with companies registered for VAT and within the Construction Industry Scheme no longer required to "pay VAT to the majority of their subcontractors".

VAT will only be paid to companies supplying labour and those that sell building materials, such as merchant businesses.

Federation of Master Builders (FMB) chief executive Brian Berry said: "The fact that 15 of the leading construction trade bodies have come together to speak to the government with one voice on this issues shows the extent to which we are concerned.

"We urge the government to rethink the timing of these changes and announce a delay of at least six months," he said.

Building Engineering Services Association (BESA) head of Legal and Commercial Services Debbie Petford said her organisation is continuing to advise its members and help them prepare for the change.

Electrical Contractors' Association (ECA) chief executive officer Steve Bratt said: "The government needs to urgently reconsider the timing of their reverse VAT introduction.

"With insolvencies already at such a high level, and a no-deal Brexit on the horizon, these changes could hit business cashflow at a pivotal time for industry."


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