VAT Change Delays Are Welcome News For Some But A Headache For Others

10th September 2019
Heather Janes

A Government U-turn on imminent VAT changes could prove a headache for some construction sector businesses, warns Kent accountants MHA MacIntyre Hudson, which has offices in Maidstone and Canterbury.

With less than a month to go until a proposed major change in the way VAT is charged and collected in the building industry, HM Revenue & Customs (HMRC) has announced a 12-month delay to its introduction.

Sue Rathmell, Head of VAT in Kent for MHA MacIntyre Hudson, said while the delay to the start of the VAT domestic reverse charge change until 1 October 2020 is a welcome relief, it’s frustrating for businesses which spent time and money to properly prepare.

She said: “For the industry as a whole, the delay will be a relief. Over the last six to 12 months businesses have been spending time and money to ensure they are ready for the changes. There was a serious concern that many sub-contractors would go out of business as a result of the new rules.

“The introduction of Making Tax Digital and the threat of Brexit at the end of October or soon after seem to have convinced HMRC it was too much to expect a key industry sector to implement such significant changes at this time.

“For those who invested the time and money to be ready, it will be frustrating and it will have been costly, but they will be prepared when the charge is introduced next October.

“The worst affected will be those sub-contractors who moved to monthly returns to get ahead of the changes. These sub-contractors will need to reverse their VAT return accounting dates as soon as possible, which HMRC said they will facilitate.

“By remaining on monthly returns sub-contractors may find they have cash flow problems in funding an unexpected VAT payment to HMRC. They are the only ones who need to take immediate action. The rest can breathe a sigh of relief.”

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