Delay confirmed for “cash flow chaos” VAT change

Grant Prior 4 years ago
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The government has postponed plans to implement VAT changes which could see 150,000 construction companies face a 20% drop in cash flow.

The reverse charge VAT change was due to come into force in October but has now been pushed back to March 2021 following industry lobbying.

It is the second delay for the plan which was originally due to be introduced in October 2019.

Construction leaders wanted to see the scheme put back to October 2021 “at the earliest”.

But an update from HM Revenue & Customs has a revised implementation date of March 1 2021.

The “domestic reverse charge” change 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.

Brian Berry, Chief Executive of the FMB, said: “That reverse charge VAT is being delayed by five months is a victory for common sense.

“The coronavirus pandemic has had significant impacts on cashflow for small to medium-sized (SME) construction firms.

“While the industry called for a delay of one year, five months’ breathing space will go some way to helping them recover.

“In the meantime, the industry will continue working with officials in HM Treasury and HMRC to implement a communications campaign that prepares the industry.”

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