CIS Chaos for the Construction Industry

With just over two months to go before the major changes to VAT take effect within the construction industry, it is said two thirds of SMEs within the sector are unaware of the new reverse charge plans and have asked of the Government to delay the implementation date.

Lack of Awareness

According to a survey of The Federation of Master Builders (FMB) of 8000 SME sized construction firms, 69% stated they had not heard of the reverse charge, and out of those who had, more than two thirds have not yet prepared for the changes. To therefore avoid the result of a negative economic impact on the industry as a whole, the FMB have put forward a recommendation to the government of a delay of at least six months to allow members to prepare themselves fully. With the uncertainty of Brexit looming over the industry, along with increasing material costs and skill shortages, the reverse charge is said to be yet another problem for the industry to deal with, with ‘chaos’ on the horizon when the new regime begins..

HMRC’S Lack of Guidance

What adds to this chaos is HMRC’s failure of delivering on its promise to help prepare the industry. The FMB have criticised the government body of publishing guidance four months before the rules were due to be implemented, leaving them with minimal time to prepare. Furthermore, the guidance is said is said to lack user friendliness, and is seen to be unclear and contradictory.

HMRC was also due to have a dedicated website and marketing campaign for the changes to help prepare the hundreds of thousands construction companies who will be impacted by the changes, but the FMB claims these have yet to transpire.

Cash Flow Effects

Lastly, but most worryingly, is the potential adverse effect the reverse charge will have on cash flow. The effect of this is said to potentially impose a significant administrative burden on construction companies due to the alteration in invoicing clients and paying taxes to HMRC. However, if HMRC fail to prepare the industry for these changes, they could impose a high risk and could result in an increase in insolvencies within the sector.