ECA has welcomed the Government’s decision to delay the implementation of its ‘Reverse Charge VAT’ rules from 1st October 2019 to 1st October 2020.
The decision follows a recent joint letter, signed by ECA, the Federation of Master Builders and other leading trade organisations, sent to Chancellor Sajid Javid demanding a delay to the initial deadline.
The move has been widely hailed as a victory for SMEs in construction. SELECT, one of the 15 organisations to sign the letter to the Chancellor, commented: “We are pleased that the serious concerns we raised have been listened to and acted upon.”
Rob Driscoll, ECA Director of Legal and Business, said: “This is very much a victory for industry, due to the efforts from ECA, FMB and others.
“Many businesses across the construction industry were evidently not ready for the initial deadline of 1st October 2019.
“Given the backlog of businesses requesting conversion from quarterly to monthly VAT returns, it seems neither were HMRC.
“Introducing the new VAT rules now, compounded by Brexit uncertainty, could have seriously overburdened businesses and sent many over the edge.
“This new deadline affords the sector, and SMEs especially, much needed extra breathing space to prepare.”
The Government’s Reverse Charge VAT plans mean that VAT-registered businesses no longer have to account for VAT. Instead, the customer will account for the VAT directly.
The result is that suppliers would in effect have a cash shortfall of 20% on all work in the short term, even though it would have to be paid to HMRC eventually.
For more information, visit: www.eca.co.uk.