Government must delay disruptive VAT changes to avoid construction chaos, says Federation of Master Builders
The Government has not properly prepared the construction industry for major VAT changes coming in October and needs to delay their implementation to avoid chaos, the Federation of Master Builders (FMB) has warned in a letter to the Financial Secretary to the Treasury.
This comes after new data published by the FMB shows that over two-thirds of construction SMEs (69%) have not even heard of reverse charge VAT and that
of those who have, more than two-thirds (67%) have not prepared for the changes.
It is feared that reverse charge VAT will have a serious impact on cash flow, as well as being a significant administrative burden, fundamentally changing the way construction companies invoice their clients and pay their taxes to HMRC. HMRC has been criticised for only publishing guidance on reverse charge VAT just four months before the changes were due to come into place.
Brian Berry, Chief Executive of the FMB, said: “Construction companies are already struggling with Brexit uncertainty, sky-rocketing material price rises and skill shortages and reverse charge VAT is yet another thing for them to deal with. What makes things worse is that HMRC has failed to deliver on its promise to help the industry to prepare. The guidance is not user-friendly and even tax experts are scratching their heads over it.”
Berry concluded: “It’s therefore not surprising that the vast majority of construction SMEs are not aware of the impending changes, despite widespread promotion by the FMB. Small business owners are busy people and clearly they don’t have time to read everything we send them. For those who are aware, they haven’t had a chance to change their systems yet as they were waiting for guidance to be published that has only just emerged. That’s why we are calling on the Government to delay the changes by another six months and to use the extra time to improve the guidance and work with us to undertake a more intensive communications campaign. HMRC should also consider holding workshops across the country to explain the changes.”