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FMB praises Government’s decision to delay change in VAT


THE Government’s decision to delay by one year the implementation of potentially damaging VAT changes for construction companies is a victory for common sense, says the Federation of Master Builders (FMB).


Reverse charge VAT was due to come into force from 1 October 2019 but, early in September, the Government announced its decision to delay implementation until 1 October 2020 after a coalition of construction organisations, led by the FMB, wrote to the Government to point out the damaging impact this badly-timed 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. Indeed, according to research by the FMB published in July, more than two-thirds had not heard of the VAT changes and of those who had, around the same number hadn’t prepared.”


News of this decision came in the same month that construction PMI data was published showing that output in September declined at the second- sharpest pace since 2009. The fall in staffing levels was the sixth in as many months and the strongest since the end of 2010.


Brian Berry added: “The construction industry accounts for seven per cent


of the UK’s GDP and over three million jobs. [These] figures, which show the second-sharpest fall in output since 2009 and staffing levels since 2010, should be a concern for us all. With ambitious infrastructure and house building targets, the Government can’t afford to lose any more capacity in this industry.


“The PMI data picks up on material shortages and bottlenecks already, even before leaving the EU, and this is likely to be a major concern in the event of a no-deal. I urge the Government to work with the industry to ensure that key construction products, critical to the building work this country needs, such as timber, are not held up at ports across the country in a no-deal scenario.”


Berry concluded: “It is encouraging to see the industry is more optimistic for the next 12 months and I hope that, if the Government is able to secure a good exit deal with the EU, then client confidence will rebound and the industry will start growing again.”


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