SELECT backs further VAT reverse charge delay

SELECT, the trade body for Scotland’s electrotechnical industry, has welcomed the UK Government’s decision to further postpone the planned VAT reverse charge scheme.

The scheme has been delayed until 1 March 2021 because of the economic chaos caused by the Covid-19 pandemic. This follows an earlier one-year delay until 1 October 2020.

Fearing a negative impact on the industry, SELECT and other UK trade bodies had written to the UK chancellor asking for a further postponement.

Alan Wilson, MD of SELECT explained, “If the changes had been implemented they would have further increased the burden on construction employers and seriously restricted cash flow. A further six months’ delay will at least give SELECT member businesses and other companies in the construction sector the breathing space they need to recover from the lockdown and alter their systems and processes.”

VAT reverse charging means businesses which are both VAT and Construction Industry Scheme registered will no longer pay VAT to most of their subcontractors. Instead, VAT will only be paid to firms which supply only labour (employment businesses) and to the merchants and businesses that sell building materials only without any fix.

John McGhee, SELECT’s director of finance and resources and association secretary added, “The very idea that, in just under four months from now, the VAT reverse charging scheme would come into effect could easily have been the last straw for many of our members. But credit where it is due: the UK Government is to be congratulated for having the foresight to push the changes into next year by which time, we hope, some semblance of normal business will have been restored.”