CBI calls for delay of reverse charge VAT

The Confederation for British Industry (CBI) has thrown its weight behind construction industry calls for a delay to the introduction of reverse charge VAT.

Hardly anyone understands how it works yet and hardly anyone is ready, but almost everyone by now knows that their cashflow is going to be hit.

A coalistion of construction associations revealed this morning that they had made a joint submission to chancellor Sajid Javid outlining why he has to postpone the introduction of the new VAT system from 1st October 2019 to April 2020. “We believe reverse charge VAT will have a significant negative economic impact on the industry, susbstantially increasing the burden on business and restricting cashflow”, they told him. “The timing of these changes could not be worse given they are due to take place just before the UK is expeced to leave the EU, quite possibly on ‘no-deal’ terms”.

Now Tom Thackray, CBI infrastructure and energy director, has weighed in to reinforce the message. “A thriving construction sector remains critical to the strength and growth of the UK economy. But at a time when businesses are making best- guess plans for different Brexit scenarios this autumn, a sweeping change to the construction sector’s tax system would do harm to companies all over the country”, he said.

“The construction sector includes many difficult-to-reach micro and small businesses, and recent research shows that despite best efforts to communicate the changes, seven out of 10 firms affected are entirely unprepared for the introduction of domestic reverse charge”.

He concluded: “Directly or indirectly, the impact will be felt by construction businesses of every size. Minimising this must be the government’s priority, and HMRC should consider pausing the implementation of domestic reverse charge to address the industry’s significant concerns”.