VAT Reverse Charge Causing Chaos in Construction

26 July 2019

  • Brian Berry, Chief Executive of the Federation of Master Builders (FMB), has stated that not enough has been done to sufficiently prepare those who will be affected by the VAT reverse charge changes
  • In a recent study, 69% of construction SMEs asked were unaware of what the new reverse charge is, and of those who did know, 67% were not prepared for the changes
  • HMRC has failed to deliver on its promise to implement programmes and sufficient training in order to help smaller businesses understand and prepare for the upcoming changes.
  • FMB are therefore calling for a six-month delay on the introduction of the VAT reverse charge

Aspire comment

Although good news for the agencies and contracting intermediaries supplying labour, the VAT reverse charge may come as a burden to those supplying a construction service. The insufficient HMRC publications surrounding the new changes will come as a huge disadvantage to those who are ‘late to the party’ and are struggling to understand how the changes will impact the ahead of 1st October 2019. If you are a supplier of construction services, or are on the receiving end of these supplies, it is essential that you make the necessary amendments before 1st October 2019 and before HMRC come knocking!

Have you considered…

  1. Cash flow and accounting systems– Does your company rely on VAT? Will the reverse charge affect your working capital and cash flow? Are your accounting systems able to cope with the new changes?
  2. Administrative burden – You may want to consider monthly returns as opposed to quarterly returns if you will become a repayment trader. This will ensure you receive reclaims from HMRC quicker.
  3. Educate your subcontractors and clients– spread your knowledge! Ensure that those you are engaging with are fully compliant and prepared to avoid unnecessary delays and conversations on or after 1st October 2019.
  4. HMRC Penalties for non-compliancy – know the consequences and don’t rely on HMRC’s “light touch” period.

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