20% drop in cash flow predicted as trade bodies call for chancellor to delay new VAT rules
A group of trade bodies - including the National Federation of Builders - have urged the chancellor Sajid Javid to postpone the upcoming Reverse Charge VAT changes due to be introduced in October.
It’s expected that more than 150,000 construction business could face a 20% drop in cash flow once they no longer receive the 20% VAT payment on bills they submit, with many trade bodies predicting a cash flow crisis throughout the industry.
Instead of receiving the VAT on bills, the cash will instead be paid to HMRC directly by the customer receiving the service. It can then be reclaimed in the normal way.
NFB suggests April 2020 would be a more suitable implementation date
The NFB has asked for the changes to be delayed until April 2020, after a recent survey found that more than two-thirds of construction businesses had not even heard of the new rules.
But it’s not just trade bodies backing a postponement of the new rules.
Linda Skilbeck, Vice-Chair of the Chartered Institute of Taxation Indirect Taxes Sub-committee told industry publication, the Construction Enquirer: “We are concerned about the combination of a substantial lack of awareness, and lack of preparedness even among those businesses who are aware of the measures.
“[A delayed implementation date] should allow time for a dedicated information campaign to be operated by HMRC, with the assistance of industry and professional bodies.”
Conclusion: Get help with Reverse Charge VAT
Integrity Software, whose award-winning construction accounting software is prepared for the new changes, have been working tirelessly to try and increase awareness of the new Reverse Charge VAT rules.
For more information about our software please reach out to us here.