Construction industry demands delay to VAT changes

A coalition of major construction trade bodies has written to the chancellor, Sajid Javid, urging the government to delay the implementation of damaging VAT changes in the construction industry. 

Raising serious concerns that the new changes will have a significant negative economic impact on the industry, substantially increasing the burden on business and restricting vital cashflow, the letter calls on the chancellor to push back the implementation of reverse charge VAT, due on 1 October, by at least six months, and claims that:

• The timing of these changes could not be worse given they are due to take place just before the UK is expected to leave the EU, quite possibly on ‘no-deal’ terms;
• Reverse charge VAT will be yet another burden on construction employers on top of other pressures facing the industry, such as material price rises, increased pension contributions and skills shortages; 
• The changes could lead to a loss of productivity, reduced cashflow and in the worst cases, lead to a hit on jobs, tipping some companies over the edge, particularly small businesses;

Brian Berry, chief executive of the Federation of Master Builders, said: “The fact that 15 of the leading construction trade bodies have come together to speak to the government with one voice on this issue shows the extent to which we are concerned. We urge the government to rethink the timing of these changes and announce a delay of at least six months. With a potential no-deal Brexit also due to take place in October, the timing could not be worse.”

Craig Beaumont, policy and advocacy director at the Federation of Small Businesses, said: “The reverse charge threatens to massively damage cashflow among small construction firms, many of which already struggle to stay afloat in an industry dogged by late payments. What’s more, preparation time has been minimal – guidance on the change has only appeared recently, yet roll-out is just two months away. With uncertainty already hurting small business confidence, the government should do the sensible thing and postpone introduction of the reverse charge.”  

Richard Beresford, chief executive of the National Federation of Builders (NFB), said: “For an industry facing lighter workloads, increasing pressure on cash flow and an already high rate of insolvency, reverse charge VAT could not have come at a worse time. By delaying the introduction of this measure, the industry will have more time to properly prepare and make their businesses more resilient, and more detailed guidance can be provided to ensure a smooth introduction.”

Click here to read the joint letter to the chancellor.