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The Federation of Master Builders (FMB) has urged the government to delay ‘disruptive’ VAT changes in order to ‘avoid construction chaos’.
The VAT domestic reverse charge for building and construction services comes into effect from 1 October 2019. The reverse charge does not change the VAT liability: it changes the way that VAT is accounted for. In the future, the recipient of the services, rather than the supplier, will account for VAT on specified building and construction services. This is called a ‘reverse charge’.
Data published by the FMB has suggested that 69% of construction businesses have ‘not even heard of reverse charge VAT’. Additionally, of those who have, 67% are ‘not prepared for the changes’.
The findings come following the publication of guidance on the VAT reverse charge by HMRC. The guidance has been heavily criticised by industry experts: some claim it is ‘not accessible’, and others have stated that it is ‘contradictory in places’.
Commenting on the data, 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.
‘It’s not surprising that the vast majority of construction SMEs are not aware of the impending changes, despite widespread promotion by the FMB. 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.’
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