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FIS, along with 14 other trade bodies, has supported a letter to the Chancellor published this morning demanding the Government to delay the implementation of damaging VAT changes in the construction industry.

A coalition of the major trade bodies in the sector, including FIS, calls on the Chancellor to push back the implementation of reverse charge VAT, which is due for implementation on 1 October, by at least six months due to the fact that:

  • The timing of these changes could not be worse given they are due to take place just before the UK is expected to leave the EU, quite possibly on ‘no-deal’ terms;
  • Reverse charge VAT will be yet another burden on construction employers on top of other pressures facing the industry, such as material price rises, increased pension contributions and skills shortages; and;
  • The changes could lead to a loss of productivity, reduced cashflow and in the worst cases, lead to a hit on jobs, tipping some companies over the edge, particularly small businesses.

This isn’t about industry not being prepared, but not being able to prepare. Whilst we’ve known about it for a long time, the information has only started to emerge from HMRC in terms of the process. We’ve been telling members about it, running workshops and webinars, but I’ve yet to meet someone who has had the letter from HMRC and so there are swathes of the market that still don’t know it is happening. Many of the accountancy software companies haven’t updated the software. The biggest issue, however, it is not the admin, it the impact on cashflow. Credit in construction is already tight and with few lifelines from traditional financiers, further drains on cash will be fatal for some companies – this is almost impossible to prepare for. I don’t think anyone could have seen the uncertainty into which this would be launched and consequently a pause would be prudent!

Iain McIlwee, FIS chief executive

The fact that 15 of the leading construction trade bodies have come together to speak to the Government with one voice on this issue shows the extent to which we are concerned. We urge the Government to rethink the timing of these changes and announce a delay of at least six months. With a potential no-deal Brexit also due to take place in October, the timing could not be worse.

Brian Berry, Chief Executive of the Federation of Master Builders