Further delay to reverse charge VAT changes

Further delay to reverse charge VAT changes

The government has again delayed the implementation of the reverse charge VAT changes until 1st March 2021, this time as a result of the Coronavirus pandemic.

A cross-industry campaign, led by the Federation of Master Builders (FMB), called for a delay of one year but says the five month delay gives much needed ‘breathing space’.

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.

“While pushing back reverse charge VAT is a step in the right direction to aid recovery, I’m also calling on the Government to intervene in the SME sector to boost growth. A package of measures that includes a national energy efficiency retrofit strategy to upgrade our homes, opportunities for SME house builders, and support for SME employers to train apprentices will all be the cornerstones of a comprehensive recovery plan.”

Richard Dalton, tax partner at BDO said: “While the delay in the introduction of the Domestic Reverse VAT Charge for Building and Construction Services (DRC) will provide affected businesses with additional time to prepare for the impact on systems and cash flow, the revised timing of the introduction to 1 March 2021 is also likely to have a potentially unforeseen consequence. Construction businesses that deferred VAT payments that were due between 20 March 2020 and 30 June 2020 as part of the UK Government’s COVID-19 measures will be required to make these payments on or before 31 March 2021, meaning that cash flow in March 2021 is likely to be a major issue in the construction sector and businesses should be focusing on the issue at the earliest opportunity.”

The changes were originally due to happen in October 2019, and were previously delayed until October 2020.

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