Chancellor urged to delay construction VAT change “chaos”

Grant Prior 10 months ago
Share

Chancellor Sajid Javid is being urged to postpone VAT changes which could cause a cash-flow crisis across construction.

More than 150,000 construction companies are facing a 20% drop in cash flow when planned VAT changes come into force in October.

The “domestic reverse charge” changes mean companies in the construction supply chain will no longer receive their 20% VAT payment when they submit bills.

The VAT cash will instead be paid direct to HMRC by the customer receiving the service who will reclaim it in the normal way.

Worried specialists have told the Enquirer the change will cause chaos across the industry.

The National Federation of Builders is among a group of trade bodies who have written to Javid today calling for the October 2019 introduction of domestic reverse charge VAT to be delayed until April 2020.

The NFB highlighted the effect the change will have on cashflow and administration costs for “an industry already facing increased material and labour costs.”

Richard Beresford, chief executive of the NFB 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.”

Tax experts are also backing calls for a delay.

Linda Skilbeck, Vice-Chair of the Chartered Institute of Taxation Indirect Taxes Sub-committee, said: “We are concerned about the combination of a substantial lack of awareness, and lack of preparedness even among those businesses who are aware of the measures.

“We urge the Government to delay the current implementation date. A start date of 1 April 2020 is more appropriate.

“This should allow time for a dedicated information campaign to be operated by HMRC, with the assistance of industry and professional bodies.

“We believe there will be significant confusion among businesses in the early days of the change, undoubtedly leading to disputes between suppliers and customers as to whether or not VAT should be charged.

“Many businesses will ring HMRC’s phone lines, which will need to be adequately resourced and trained to deal with these queries. At the same time, businesses and HMRC will be dealing with the implementation of Making Tax Digital, as well as the consequences of Brexit.

“As noted in the policy paper, businesses may be unprepared for the cash flow implications of the reverse charge, potentially leading to financial difficulties and even insolvency in the worst cases, as well as significant levels of business disruption even among larger companies.”

Latest news

Kier Highways and Seddon reinstated to Prompt Payment Code

Contractors now keeping to pledge to pay 95% of suppliers within 60 days
2 hours ago

Leading brick makers to axe 600 jobs

Ibstock and Forterra restructure businesses to meet forecast fall in demand
3 hours ago

London fit-out firm Square Metre in administration

Fifty jobs cut as lockdown tips £32m fit-out firm over the edge
3 hours ago

Last webinar for contractors interested in £600m plant

Final procurement information event before OJEU notice next month
3 hours ago

Offsite system to cut staircase construction times by 80%

New integrated balustrade system added before precast stairs lifted into place on site
19 hours ago

Arup bags job to re-open Cardiff city centre

Arup plans to improve public spaces, repurposed streets and digital infrastructure
22 hours ago

Hard-hat mounted cough guard will help protect site workers

New product from JSP will help keep sites safe
22 hours ago
JSP Ltd

Keep the industry updated by joining the Enquirer Directory

Membership lets construction know you are open for business now or in the future
2 years ago

Balfour Beatty to start £355m Hull A63 scheme

All systems go for delayed Castle Street upgrade to transform Hull
1 day ago

Contractors face data danger fighting covid contract disputes

Redundancies could see project knowledge lost
1 day ago

Mace bags role on £39bn Northern Powerhouse Rail plan

Firm takes lead on project controls, project, stakeholder and commercial management
2 days ago

Cash flow fears spark call for another delay to VAT changes

Thousands of firms unaware tax change could cut cash flow by 20%
2 days ago

Driver unveils changes at the top

Mark Wheeler takes helm as Gordon Wilkinson steps down as CEO
1 day ago

ISG mobilises for £17m north London town hall fit-out

First phase of £150m Waltham Forest Town Hall redevelopment starts
1 day ago

Morrison wins £42m Scottish factory of the future

Work to start this summer on National Manufacturing Institute Scotland.
1 day ago

London mayor loans Mount Anvil £50m to boost building

New partnership to boost housing and construction in the capital
2 days ago

Henley Construct lands £12m Croydon housing contract

Demolition to start imminently to revamp street market site
1 day ago

Piling problems force BAM to tear down building frame

Major construction issues delay new £65m Sheffield University faculty building
2 days ago

Industry leaders draw up roadmap to recovery

Construction able to bounce back stronger and more productive within two years
2 days ago

Leaking diamond synchrotron roof to be replaced

Hunt starts for roofing contractor to strip and replace vast circular roof
2 days ago

ISG director leaves to head-up Structure Tone London division

Danny Blakeston joins rival as London managing director
2 days ago

Balfour sets-up “New Normal” Covid-19 taskforce

Contractor focuses on cash discipline and improving productivity on sites
2 days ago

Hinkley C team hits key target despite Covid-19 curbs

BYLOR delivers record pour on second reactor base with reduced workforce
2 days ago

Seven win new highways geotechnical framework

Highways England's new geotechnical framework worth £91m over four years
2 days ago

Plans lodged for £120m Nottingham hotel scheme

Grade II listed Guildhall to become 162-bed luxury hotel
2 days ago

Fit-out firm fined £1.1m after ladder fall

Engineer needs transfusion after massive blood loss caused by fall injury
5 days ago

SIG management blunders rack-up £112.7m loss

New boss promises growth strategy after PwC called in to investigate divisional forecasts
5 days ago

Union calls for construction workers to wear masks

Unite demands revisions to Construction Leadership Council guidelines
6 days ago

Robertson approved to start major Blackpool hotel

Site clearance to start next week on phase 2 of £100m Talbot Gateway regeneration
5 days ago

Failed NHS Nightingale joinery firm sold in pre-pack deal

J&P Carpentry and Joinery went into administration after working on Birmingham NEC hospital
6 days ago

Contractor services