Chancellor urged to delay construction VAT change “chaos”

Grant Prior 4 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

Contractors rally to help Clugston staff facing the axe

Trade body calls up firms to offer laid off staff jobs in run up to Christmas
1 day ago

Clugston files for administration

Hundreds of jobs at risk as financial crisis hits regional contractor
2 days ago

London Resort reveals next generation theme park designs

Developer hopes to start construction in 2021
2 days ago

Historic Liverpool building refurb now on third fit-out firm

Overbury brought in to replace Caddick who took job from Styles & Wood
2 days ago

Green light for Birmingham’s tallest resi tower

Construction go-ahead for 51-storey skyscraper
2 days ago

McLaren and Sisk hire regional directors from Kier

Andy Langley and Bruce Clarke take up key roles
2 days ago

Oxford Science Park expansion approved

Major office and laboratory complex is set to be built in Oxford next autumn
2 days ago

Giant property fund suspends dealing

Outflow of cash prompts move as investors flee sector
2 days ago

Mace takes jump factory system to next level

Contractor launches Mace Tech business to transform high rise flats building
3 days ago

Winvic to build £57m Cardiff PRS tower

Winner confirmed for build to rent scheme as Grainger agrees funding deal
3 days ago

Creagh Concrete targets £200m turnover

Expanding concrete specialist looks to grow workforce to 1,000
3 days ago

Council fined £1.4m after falling bollard injures girl

Court hears how failings at council's highways deprtment left a six-year old with brain injuries
3 days ago

Consultation opens on ring-fencing retentions in Scotland

Specialist contractors call for action to protect retention payments
3 days ago

Vital Energi lands £7m M&E package from Berkeley Homes

Latest win for specialist at Royal Arsenal Riverside development
3 days ago

Willmott Dixon wins £39m university refurb job

London South Bank University awards contract for new learning hub
3 days ago

Edinburgh private rental scheme approved

Moda Living gets all clear on 139-flat Springside scheme
3 days ago

Plan for £100m landmark Portsmouth University project

13-storey academic building will rise to
3 days ago

Go-ahead for £500m Thames riverside fire station scheme

Developer U+I to start construction on major mixed use site in 2021
4 days ago

Just days left for deal to keep Midlands hospital restart on track

Government red tape over funding improvement targets holds up deal
4 days ago

Amey utilities and waste business up for sale

For sale sign hoisted over loss-making divisions employing around 6,000 staff
4 days ago

Skanska chalks up £23m Bristol secondary school job

Contractor has strong track record of school projects in the city
4 days ago

Nod for 350 flats plan at old Leicester City ground

Mix of rental and for sale flats to be built at former Foxes homes
4 days ago

Buyers report construction still in “contraction hole”

Speed of decline falls in November but political uncertainty casts shadow over industry
4 days ago

Boost your online presence – join the Enquirer Directory

Site for suppliers and buyers showcases products, services and latest stories
2 years ago

Heavy rain hits another major civils job

Galliford Try's £120m Lincoln Eastern Bypass turns into a quagmire
5 days ago

Sky plans major film studio complex at Elstree

Legal & General will develop and part-finance the 32-acre site in Hertfordshire
5 days ago

Chancellor pledges review of freelance tax changes

Review of planned IR35 changes could spare construction widespread disruption
5 days ago

ISG on board for £89m Cardiff bus interchange

Mixed use scheme is contractor's biggest win of the year
5 days ago

Atkins online plea to SMEs to help fix potholes

Consultant aims to reach more small firms by bypassing traditional procurement route
5 days ago

Plan for new 8,000-seat Edinburgh indoor arena

Arena scheme to include conference, retail, leisure and hotels
5 days ago

Contractor services