Reverse charge VAT was originally due to come into force from October 1, 2019 before the government succumbed to industry pressure amid Brexit uncertainty to delay its implementation until October 1 this year.

Now fearing its impact on firms dealing with the effects of the COVID-19 pandemic, the Treasury has pushed it back to March 1, 2021.

The Federation of Master Builders (FMB) has called the delay a “step in the right direction” but warned that a longer postponement was warranted.

The FMB and the Construction Leadership Council led a cross-industry campaign for a delay to the introduction of reverse charge VAT, arguing that firms needed ‘breathing space’ to work towards recovering cashflow post-COVID-19.

Brian Berry, chief executive of the FMB, said, “That reverse charge VAT is being delayed by five months is a victory for common sense. The coronavirus pandemic has had significant impacts on cashflow for small to medium-sized (SME) construction firms. While the industry called for a delay of one year, five months’ breathing space will go some way to helping them recover. In the meantime, the industry will continue working with officials in HM Treasury and HMRC to implement a communications campaign that prepares the industry.

“While pushing back reverse charge VAT is a step in the right direction to aid recovery, I’m also calling on the Government to intervene in the SME sector to boost growth. A package of measures that includes a national energy efficiency retrofit strategy to upgrade our homes, opportunities for SME housebuilders, and support for SME employers to train apprentices will all be the cornerstones of a comprehensive recovery plan.”

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