The government’s decision to delay the implementation of potentially damaging VAT changes for construction companies for 12 months is a victory for common sense, says the Federation of Master Builders (FMB).

Reverse charge VAT was due to come into force from 1st October 2019 but the government has announced its decision to delay implementation until 1st October 2020 after a coalition of construction organisations, led by the FMB, campaigned to point out the damaging impact the policy would have on the sector.

Brian Berry, chief executive of the FMB, said: “I’m pleased that the government has made this sensible and pragmatic decision to delay reverse charge VAT until a time when it will have less of a negative impact on the tens of thousands of construction companies across the UK. To plough on with the October 2019 implementation could have been disastrous given that the changes were due to be made just before the UK is expected to leave the EU, quite possibly on ‘no-deal’ terms. 

“The situation hasn’t been helped by the poor communication and guidance produced by HMRC. Despite the best efforts of construction trade associations to communicate the changes to their members, it’s concerning that so few employers have even heard of reverse charge VAT.”

Berry concluded: “It is reassuring that the government has listened to the construction industry, which has come together to make clear to the government that sticking to the October 2019 timetable could lead to a loss of productivity, reduced cashflow and in the worst cases, lead to a hit on jobs, tipping some companies over the edge. 

“What’s required now is for the government and industry to work together to deliver a sector-wide communications campaign, which must include plain English guidance on the changes. We also want to work with the government to deliver workshops aimed at construction employers, held in locations across the country, to explain what’s happening and why,” said Berry.