During December, we welcomed three new companies to the FIS membership. All three are Supplier Members: Bryson Products Ltd, Protektor UK Ltd and Tekfloor Limited.
We look forward to a long and successful relationship with our new and existing members going forward in 2018.
A consortium of more than 20 trade associations, including FIS, has written an open letter to the Daily Telegraph calling for an end to poor payment practices in construction.
“In the construction industry, clients and main contractors have traditionally withheld part of the payment owed to specialist contractors and builders for a period of time, ostensibly as security against defective work or risk of insolvency.
As trade associations and professional bodies representing many small- and medium-sized businesses, we want to highlight the following facts about this practice, known as cash retentions.
Some £10.5 billion of the overall construction sector turnover of £220 billion is held in retentions by clients and main contractors from small- and medium-sized businesses down the supply chain. An estimated £7.8 billion in retentions has been unpaid in the construction sector over the past three years, and in the same period, £700 million of retentions were lost due to upstream insolvencies.
Poor payment practices in construction affect productivity, innovation and investment, holding back the sector’s overall capacity to do business and invest in the workforce. Given that construction is a cornerstone of enterprise in Britain and fundamental to enhancing the country’s built environment, the problem of retentions cannot go on – it needs tackling as a priority.
There is, though, a simple way to reform the system. Regulations should specify that retentions must be held in a statutory retention deposit scheme (rather than in clients’ own bank accounts), an approach which is already being used successfully in Australia.
The Government consultation on retentions is still underway, but we believe that there is no longer any reason to stick with the status quo, or for this issue to be potentially kicked into the long grass again.
Reforming retentions would be a good way for the Government to show it is truly standing up for the interests of small- and medium-sized businesses, and is willing to put them at the forefront of plans for an industrial strategy and the expansion of the UK economy.”
The Daily Telegraph has published the letter online and also created a news story – Deposit protection scheme could provide boost for builders.
On behalf of the signatories, the letter will be shared with Business Secretary Greg Clark.
As part of the grant reform programme, CITB has now published a second set of training standards for your review. The standards for review and feedback forms can be found here. The consultation period will be open until 31 January 2018.
To help FIS get the best deal and right qualifications for our sector, we have a working group which you can join – contact Helen Yeulet via skills@thefis.org
CITB has recently concluded their consultation on the first set of training standards. The final versions are available to view online here.
The Department for Communities and Local Government (DCLG) published the first output from the Industry Response Group (IRG) on 11 December. It not only contains guidance for owners of high-rise buildings on what to do where the building is clad with Aluminium Cladding Material (ACM) but also provides guidance on compartmentation.
The Information Note is intended to assist building owners in assessing what measures they should consider taking to make their buildings safe. It contains a flowchart to guide building owners through the process of remediation and further information on the following:
The Industry Response Group consists of members from the Construction Industry Council, Build UK and the Construction Products Association; FIS is contributing to the CPA group.
The Government’s plans to tackle VAT fraud in the construction industry by introducing a domestic ‘reverse charge’ VAT scheme for construction services will come into effect on 1 October 2019. The HMRC Consultation Outcome was published on 1 December and there will be a technical consultation on draft legislation in spring 2018.
What does this mean in the supply chain?
As an example, the main contractor who owes a subcontractor £100 plus VAT £20 will only pay them £100 and will pay the VAT straight to HMRC. The subcontractor will, therefore, receive only 83% of the actual cash into their bank account. Although they won’t have to pay as much VAT to HMRC as they do now, there won’t be the funds swilling about to keep going in an hour of need. VAT owed to the Government is often used by firms to keep afloat.
It’s not just main contractors and major subcontractors who will be affected – everyone paying anyone else for work done who is not the end consumer of the service – a customer – will be required to reverse charge VAT.
The whole business of invoicing for work done and what VAT to show on an invoice, who determines the rate of VAT due on a supply and how we all communicate the rates to be used, will be up for grabs.
All accounting software used in the industry will have to change. In addition, we will all be ‘Making Tax Digital’ and getting our accounting packages to report quarterly at the same time.
It is going to be a difficult couple of years for the IT, tax and accountancy specialists in construction.
Peter Aldous, a chartered surveyor before being elected to parliament in 2010, has tabled a private member’s bill to protect the millions of pounds of cash retentions withheld from construction SMEs. The Ten Minute Rule Bill will seek to amend the 1996 Construction Act and ensure that retentions within construction are held in a third party trust scheme. A key aim will be to help protect companies in the construction supply chain from insolvency and payment uncertainty. The Bill’s first Reading took place on 9 January 2018 and can be viewed via the link on the right.
Loading ...Recent research commissioned by the Department for Business, Energy & Industrial Strategy (BEIS) has revealed that £7.8bn worth of retentions was outstanding over a three-year period. Peter Aldous said that he was concerned about the impact on SMEs: “I have been aware of retentions as an issue for a while, and with construction being a tough industry and uncertainty surrounding many aspects of the economy, small businesses need as much support as possible.” He added: “Over the past three years, £700m worth of retention payments to small businesses were lost due to the insolvency of a client, and if a small business suffers from an upstream insolvency of this kind, they are punished twice; firstly with the loss of work, and secondly with the loss of retention money. We, therefore, need action on this before more millions are lost. SMEs are the backbone of the UK economy, which is why they need support and protection. This bill is not about abolishing payment retentions; it is about making sure that people’s money is safe so that businesses can grow and invest in their future.”
Join the campaign – download the FIS letter template and write to your MP to request their support of the Retentions Trust Bill before the second reading which takes place on Friday 15 June.
