THE NATIONAL Federation of Builders (NFB) has written 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 Construction Industry Scheme (CIS)-registered customers receiving the service will have to pay the VAT due directly to HMRC themselves instead of paying the supplier. The reverse charge applies through the supply chain where payments are required to be reported through the CIS.
Costs of VAT reverse charge
The NFB, together with other trade federations, has highlighted the effect the change will have on cashflow and administration costs for an industry already facing increased material and labour costs.
The guidance issued by HMRC was delivered late and according to the NFB is not clear and leaves some questions unanswered. The NFB believes 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 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.”