Reverse charge VAT delayed until 2020

THE Government has announced the implementation of reverse charge VAT will be delayed by a year.

Originally scheduled for 1 October 2019, the changes will now come into play on 1 October 2020.

Reverse charge VAT means that the customer receiving the service will have to pay the VAT, rather than including it in the supplier’s invoice. In July, the Federation of Master Builders (FMB) revealed that 69% of its members had heard nothing about reverse charge VAT, and in those who had, only 33% believed they were prepared for it.

The findings were followed up by a letter signed by fifteen trade bodies addressed to chancellor Sajid Javid, urging for the implementation of reverse charge VAT to be delayed to allow businesses to suitably prepare for the changes.

Gordon Nelson, director of FMB Scotland, recently told Project Scotland that if reverse charge VAT was implemented on October 1 2019, it would 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”.

Speaking before the UK Government’s decision to delay, he added, “The changes could lead to a loss of productivity, reduced cashflow and in the worse cases, lead to a hit on jobs, tipping some companies over the edge, particularly small businesses.

“Small business owners such as our members will be least able to cope, as they already spend on average 44 hours per year, which is the equivalent to six working days, on VAT compliance and are currently getting to grips with ‘making tax digital’ for VAT returns. With a potential no-deal Brexit also due to take place in October, the timing could not be worse.”