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VAT Reverse Charge delay a victory for industry

ECA welcomes announcement to delay Reverse VAT Charging until October 2020

11 September 2019

Leading electrotechnical and engineering services trade body ECA has welcomed Government’s decision to delay the implementation of its new ‘Reverse Charge VAT’ rules from 1st October 2019 to 1 October 2020. The move has been widely hailed as a victory for SMEs in construction.

The decision follows a recent joint letter sent to Chancellor Sajid Javid, signed by ECA, the Federation of Master Builders, and other leading trade organisations, demanding a delay to the initial deadline of 1 October 2019.

Rob Driscoll, ECA Director of Legal and Business, said:

“This is very much a victory for industry, due to the efforts of ECA, FMB and others. Many businesses, and their accountancy software providers, 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.

ECA has been providing practical advice on the proposed VAT changes to Members since 2018 and will continue to do so, ensuring they make the most of the next 12 months to ensure minimal disruption to regular business once the new Reverse Charge VAT rules are in place.

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