Good news for the construction sector as reverse charge VAT change is delayed by a year

Nigel Roberts

Nigel Roberts

VAT Director

HMRC has today announced that the introduction of the construction industry VAT reverse charge, due to come into effect on 1 October this year, has been postponed for 12 months.

This will be hugely welcomed by the sector – the new rules would have had a massive impact on cash flow for many smaller contractors and required considerable investment in new accounting software to administer. Had the changes gone ahead this year, they would have created a huge headache at a time when construction is already under pressure and dealing with the uncertainties arising from Brexit.

This is great news for the construction sector. The reverse charge rules are extremely complicated and HMRC’s communication of such fundamental changes has been delayed and poor – many affected businesses remain unaware that they were due to start in less than a month or the impact they would have on working capital and accounting systems.

Many within the sector and in the tax community have argued strongly for a deferral. Today’s announcement, although coming very late in the day, will create a breathing space at a time when many other factors are bearing down on construction businesses and allow time for a more measured implementation.

For more information on the delay to the construction sector reverse change deferral please contact me or a member of our Construction & Property or VAT teams.