The long delayed VAT Domestic Reverse Charge for the Construction Industry was finally introduced on 1st March 2021.
The changes are far reaching to the construction industry and in these difficult times it’s amazing how many small businesses are still unaware of the changes and how many large companies are taking a flippant approach to the changes and are insistent that subcontractors apply the reverse charge even when the work undertaken clearly falls outside the construction industry scheme.
The lack of knowledge in the construction industry and the lack of clarity or support from HMRC will lead to numerous issues arising over the coming months. The Revenue have stated they will take a soft touch to compliance in the early days but the impact could be significant with incorrectly raised or disputed invoices.
The second big issue is off course cashflow! At a time when the Government has been focusing on protecting jobs and many contractors will be using the VAT deferment scheme to delay payment of their outstanding VAT liabilities from last year, it is staggering that HMRC are implementing the changes which will have a major impact on the cashflow of small and medium size subcontractor businesses which will directly impact on the viability of these businesses and thousands of jobs!
In our many blogs on the subject and our recent webinar which you can watch below we highlighted not only the new rules but also the cashflow impact for businesses.