Reverse charge VAT: hold off until 2020 - NFB

Posted On: 
9th August 2019

The reverse charge VAT should be held off until 2020, writes NFB. 

A letter from 15 trade federations has been sent to Sajid Javid MP, the chancellor of the Exchequer, asking for the 1 October 2019 introduction of domestic reverse charge VAT to be delayed until April 2020.

Reverse charge VAT means that the customer receiving the service will have to pay the VAT to HMRC instead of paying the supplier. The reverse charge applies through the supply chain where payments are required to be reported through the Construction Industry Scheme. Making the payment of VAT the responsibility of the customer rather than the supplier, there is no opportunity for the supplier to avoid paying VAT.

The NFB, together with the other trade federations, has highlighted the effect the change will have on cash flow and administration costs for an industry already facing increased material and labour costs.

The guidance issued by HMRC was delivered late, is not clear and leaves some questions unanswered. A delay before introducing the charge would give the industry and government time to properly prepare the industry to understand the changes and update systems.

Richard Beresford, chief executive of the National Federation of Builders, said: “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. 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.”

The NFB is holding a series of Regional Construction Forums around the country in October and November 2019. Leading construction tax expert Liz Bridge will be offering practical advice on how to deal with reverse charge VAT.

For details of the nearest forum to you, go to https://www.builders.org.uk/events/ and book your free place.