Industry calls for delay on reverse VAT rule

VAT reverse charge, taxation

A number of key construction and taxation bodies have called on government to delay the proposed introduction to VAT Reverse Charging until April 2020.

The change is currently set to take place on 1st October 2019, coinciding with the UK timetable for leaving the EU. Many have said that this will cause too great a burden on small businesses.

The new Vat Reverse Charging applies to the majority of construction-related services. Companies that are VAT registered and also registered with the Construction Industry Scheme (CIS) will no longer pay VAT to the majority of their sub-contractors. Instead, as purchasers they will be responsible for paying the VAT on an invoice directly to HMRC.

HMRC has already stated that it realises implementing the new rules may cause difficulties. As a result it will take a ‘light touch’ in dealing with any errors made in the first six months of the scheme ‘as long as you are trying to comply with the legislation and have acted in good faith”.

Industry associations are warning members to ensure they are aware of the proposed changes and that they are prepared for any likely impacts to their business cash flow.

Picture credit:Shutterstock/Tomislav Pinter 

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