FINANCE


Changes to VAT for construction industry


Brent Goodwin (pictured), VAT Manager for Accountants and tax experts Newby Castleman, is urging construction companies to prepare for changes to the VAT system for their industry, due to come into effect to protect against fraud.


HMRC is implementing reverse charge measures, announced in the Autumn Budget of 2017, which will mean that for certain construction services the end customer will be responsible for the VAT in respect of those purchases, as opposed to the supplier. The changes, which are set to come into


effect on 1 October 2019, will affect contractors and sub-contractors in the construction trade, and could possibly have cash flow implications for these businesses. HMRC has recently been


suffering losses to missing trader fraud within the construction industry. In some instances traders have submitted large VAT refund claims in respect of what have turned out to be bogus building projects before disappearing, meaning a substantial loss to the taxpayer. This new reverse charge system is intended to put a stop to this. The reverse charge will include goods, where


those goods are supplied with specified services. The new legislation is currently under review, following a consultation period, and further changes are expected to be announced before it is put in place.


The reverse charge does not alter the liability


of the supply and so will not affect a trader’s overall VAT position. A standard rated supply will remain standard rated, even where the trader is not required to charge output tax under the proposed legislation. This shifting of the responsibility for charging, collecting and remitting the VAT will in some circumstances make life easier for sub-contractors. They will not have to make the difficult decisions about whether to charge VAT or not if their services are being supplied to a contractor or developer - the responsibility for such decisions will shift to the main contractor or developer instead.


It is of course right that the problem of


missing trader fraud within the construction industry be tackled, but if traders have not picked up on the forthcoming changes they may be faced with unwanted penalties and interest as a consequence of failing to implement the reverse charge correctly. We would recommend that in the event of doubt, traders should seek guidance from their professional advisers to ensure there are no such unwelcome surprises.


Laws to help small businesses welcomed


Small businesses could be given new powers to improve cash flow by borrowing against outstanding invoices. Many supply contracts prevent


'assignment' of invoice debt, which makes it hard for smaller firms to secure loans from banks or investors. But Small Business Minister Kelly


Tolhurst recently put forward new laws to arm small businesses against unfair contracts that stop them raising money from unpaid invoices. Under the proposed new laws,


any such contractual restrictions entered into after 31 December 2018, with limited exceptions, would have no effect and could be disregarded by small businesses and finance providers. The move will stop larger


businesses from abusing their


market position and is expected to provide a long-term boost, estimated to be worth almost £1bn, into the UK economy. Kelly Tolhurst said: “The UK’s 5.7 million small businesses are the


backbone of our economy and central to our modern Industrial Strategy, with more than 1,000 starting up every day. These new laws will give small businesses more access to the finance they


New laws give small businesses better access to finance


need to succeed and will help ensure they have a level playing field from which to set fair contracts with the businesses they supply.” The proposed laws are being


tabled because restrictive covenants in contracts with larger businesses often stop their suppliers from 'assigning receivables’ – the right to assign the proceeds from an invoice. This assignment is essential for invoice finance to operate. Restrictive contract terms are


used by larger businesses to maintain a hold over their suppliers, with small firms often unable to negotiate changes to the contract because they do not have enough power in the marketplace. The legal changes are set out in


the draft ‘Business Contract Terms (Assignment of Receivables) Regulations 2018’.


business network October 2018 77


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84