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Delay to VAT Reverse Charging welcomed by industry

September 12, 2019 featured image

Last month we posted a blog about HMRC’s new reverse charge for construction services, which was set to come into force this October.

Following pressure from industry, however, the Government has decided to delay the introduction until October 2020. BESA and other key industry bodies sent a letter to Sajid Javid MP, pressing the Government to stall the VAT reforms.

BESA CEO David Frise said: “This is a big win for our members. Thanks to the concerted advocacy efforts of the FMB, BESA, and other trade bodies, common sense has prevailed.

“If the Government had not delayed the changes, many SMEs would have been caught off guard, facing increased burden and restricted cash flows while simultaneously bracing for the serious disruptions caused by the UK’s planned withdrawal from the European Union on 31 October.

“This gives us plenty of time to help businesses plan a smooth transition in the way VAT is charged by October 2020.”

Frise continued: “While these changes have been delayed, it is important to remember they will still come into effect next year. So, businesses must use this extra time to make sure they are fully prepared.

“BESA members will continue to receive regular guidance through monthly tax bulletins as well as template letters and invoices we have prepared to inform their supply chains.

“Our members can also tune into our second free webinar on 19 September to receive plenty of practical advice.”

What is reverse charge VAT?

Reverse charge VAT means that the recipient of goods rather than the supplier must account for VAT due on certain construction-based services. It is being introduced to combat missing trader fraud in the construction sector.

Be prepared for 2020

When reverse VAT is introduced in October 2020, all VAT registered building services businesses will no longer pay VAT to the supplier, but direct to HMRC through their own VAT return.

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