SELECT is among 15 leading UK construction bodies which have written to the UK Government to share serious concerns regarding the implementation of reverse VAT charges and call for a delay in implementing the new rules.
HMRC plans to introduce VAT Reverse Charging on the majority of construction-related services from 1 October. Companies who are both VAT and Construction Industry Scheme registered will no longer pay VAT to the majority of their subcontractors.
Instead, VAT will only be paid to firms who supply only labour (employment businesses) and to the merchants and businesses that sell building materials only without any fix.
If introduced, SELECT and the other industry bodies say the reverse charge VAT will have a significant negative impact on the industry.
In a letter to Chancellor of the Exchequer Sajid Javid, the organisations call for the proposed introduction to be delayed by six months until April 2020.
SELECT Managing Director Alan Wilson said: “This move will further increase the burden on construction employers and seriously restrict cashflow in an industry that already suffers from late payment.
“There are serious concerns that reverse charge VAT could lead to a loss of productivity and reduced cash flow, leading job losses and tipping some companies over the edge.
“Small businesses are most vulnerable to potential damage, as they do not have the means to cope with further financial difficulties.”
The other signatories are the: Building Engineering Services Association (BESA), British Construction Steelwork Association (BCSA), Build UK, Civil Engineering Contractors Association (CECA), Construction Products Association (CPA), Electrical Contractors’ Association (ECA), the Federation of Master Builders (FMB), the Federation of Small Businesses (FSB), Finishes & Interiors Sector (FIS), Lift & Escalator Industry Association (LEIA), National Federation of Builders (NFB), Scottish and Northern Ireland Plumbing Employers’ Federation (SNIPEF) and the Specialist Engineering Contractors’ Group (SEC Group).