Stay of execution: What does the delay to the reverse charge VAT regime mean for construction?


The threat of a 20% cut to the cash flow of 150,000 businesses has receded after a delay, but the danger to firms remains

The good news is that companies who rely on VAT to stay in business can keep charging it on the work they do for main contractors. The bad news is that they will only be able to do so for another year. Reverse-charge VAT, which was going to be introduced next month, will now come into force from October 2020. 

Last Friday’s shock decision by the government has given an unexpected reprieve to construction firms, most of whom were blissfully unaware of the fiscal danger they faced. The level of ignorance of the government’s plans played a part in changing the minds of ministers. But a more compelling factor was the sheer strength of opposition – and unity – from an industry that struggles to present a united front.

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