Reverse Charge VAT Plans for Construction Services Pushed Back by 5 Months

Government plans to introduce new rules around domestic reverse charge VAT for construction services have been pushed back by five months until March 1st 2021.

The rules had been scheduled to come into effect from October this year but their introduction will now be delayed in response to the impact that coronavirus has had on the construction sector. 

Among those to welcome the delay is the Federation of Master Builders (FMB), whose chief executive Brian Berry has described the move as “a victory for common sense”.

Mr Berry has explained that the coronavirus pandemic and the accompanying lockdown situation has had a big impact on the cashflows of a great many small to medium-sized construction sector operators.

The federation has been concerned that the introduction of new VAT rules would represent a further financial and administrative headache for a lot of those businesses.

Although they’ve welcomed the decision to delay the phasing in of the new reverse charging policies, the FSB had wanted the delay to be for a full year rather than five months.

However, the feeling at the organisation is that an extra five months to prepare for the potential ramifications of the new rules will provide some worthwhile “breathing space” that could be crucial for construction sector companies.

Activity and optimism levels within the UK’s construction sector declined dramatically in March and April as the coronavirus crisis severely curtailed what companies in the industry were able to do.

The FMB has said it hopes to see the government introducing a package of measures that directly helps to support a recovery within the construction sector in the coming months and years.

“While pushing back reverse charge VAT is a step in the right direction to aid recovery, I’m also calling on the government to intervene in the SME sector to boost growth,” said Mr Berry from the FMB.

“A package of measures that includes a national energy efficiency retrofit strategy to upgrade our homes, opportunities for SME house builders, and support for SME employers to train apprentices will all be the cornerstones of a comprehensive recovery plan,” he said.