Chancellor urged to delay construction VAT change “chaos”

Grant Prior 1 week 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

VolkerWessels UK on track to top £1bn turnover

Group margin hits 3% as UK business enjoys record order book of £1.4bn
2 days ago

Lendlease unveils new construction boss

Company veteran Simon Gorski takes over from Neil Martin
2 days ago

Kier to start work on £50m new home for Durham council

Contractor promises major boost to local supply chain
2 days ago

Willmott Dixon to complete Pochin Stoke site

Replacement found for collapsed contractor on £37.5m scheme
2 days ago

Britain’s oldest building company strikes deal with creditors

R Durtnell agrees debt repayment plan with suppliers owed more than £8m
2 days ago

Worker jailed for tax dodging on major London sites

Self-employed Bournemouth builder sentenced to 30 months for evading £110,000 in tax
3 days ago

Bid race starts for £40m M1-A6 link road

Central Bedfordshire Council says project could start in March 2020
2 days ago

Castle Building Services bags £6m M&E package

Early appointment by Bowmer & Kirkland alllows plenty of pre-site start design time
2 days ago

Bright ideas from Balfour Beatty staff save £4m

"My Contribution" programme sees staff suggest 2,600 ways to improve efficiency
3 days ago

Boost your online presence – join the Enquirer Directory

Site for suppliers and buyers showcases products, services and latest stories
1 year ago

£120m plan to replace Liverpool flyover with tunnel

Plan lodged to demolish flyover and replace it with a dual-lane tunnel
3 days ago

B&K checks in with Manchester “Jenga” hotel

Work to start next month on 275-bed Piccadilly Station hotel
3 days ago

Radisson backs £5bn Kent theme park with hotel plan

Hotel giant takes stake in project as backers look to confirm construction start date
4 days ago

Super safe scaffold screen could slash site costs

System in use at Twickenham station site boosts safety and saves money
3 days ago

McMullen lands cladding package at King’s Cross

Specialist to deliver striking facade for main contractor BAM
3 days ago

Balfour results can help “restore confidence” in construction

Boss Leo Quinn says latest numbers show contractors can deliver
4 days ago

HS2 relaunches race for £300m tunnels fit-out

Latest plan for M&E and ventilation bid race to be detailed at London industry day next month
4 days ago

Midas Group struggles to raise margin above 0.25%

Regional builder rejigs operation to restore golden touch
4 days ago

Polish steel entrepreneur buys Builders Beams

Steelo swoops to save 45 jobs at fabricator
5 days ago

Spanish contractor seals £180m Aberdeen waste plant job

Acciona Infrastructure will deliver full turnkey package on Ness Energy Project
4 days ago

Kier and Interserve secure £100m NHS framework places

North East NHS Trust picks trio of firms for estate improvement programme
4 days ago

Workers given mental health monitors to wear

Spencer staff hit blue button on wristband when they are feeling anxious
5 days ago

Contractors advice wanted on £400m concrete road renewal deal

Highways England wants to talk to potential bidders about procuring resurfacing framework
5 days ago

Silvertown Tunnel award suspended after challenge by losing bidder

Transport for London forced to suspend summer contract confirmation after legal action
6 days ago

Colas UK targets growth after trading loss

Colas chief sets out business turnaround plan to double in size
5 days ago

Interserve fit-out boss joins Morgan Lovell

Matt Bray takes head of contracts role at Morgan Sindall office fit-out firm
5 days ago

Subcontractors wanted for £400m Dounreay decommissioning

Framework contractors to host suppliers day next month: Register now
5 days ago

Henry Boot buys social housing contractor

Sheffield developer and contractor buys controlling stake in Starfish Commercial
5 days ago

Caledonian lands £10m modular student digs deal

Offsite specialist will help cut build times by half at Hereford scheme
5 days ago

Money owed to Lakehouse creditors leaps to £27m

Investigations continue into controversial collapse
6 days ago

Contractor services