Industry asks chancellor for another delay to reverse charge VAT plan

Construction trade bodies have called for the government to delay introducing the reverse charge VAT again because of the economic impact it will have on firms dealing with the effects of the covid-19 pandemic.

The changes were originally due to come into effect on 1 October last year and would have seen the customer receiving services having to pay the VAT due to HMRC instead of the supplier – meaning companies would no longer receive their 20% VAT payment when they submitted bills.

But last September, the government confirmed the changes would not come in until this October – after the industry said it was not ready enough to deal with the proposals.

The letter, which was signed by groups including the Construction Leadership Council, Federation of Master Builders, Build UK and the Construction Products Association, was sent to chancellor Rishi Sunak last week.

The letter said: "We are writing as a coalition of construction industry representatives to request the postponement of reverse charge VAT, due to be implemented in October this year.

"We are calling for it to be delayed by a minimum of one year in recognition of the significant impact that the coronavirus has had on the industry."

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The letter added: "Construction is fundamental to economic recovery post-coronavirus. Delaying the implementation of reverse charge VAT will support the industry to contribute to this recovery and to retain the capacity necessary to deliver on the government’s housing and infrastructure projects in the years ahead."

It said construction companies have been dedicating their efforts to responding to the coronavirus crisis and have not had time to get ready for the changes.

It also said the virus's impact on activity and cashflow in the sector had increased concern the charge will stifle cashflow in the supply chain and put the survival of many companies further at risk.