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Building a Better Future for the Construction Industry

CECA: Industry Calls For Reverse Charge VAT Legislation To Be Pulled   3rd February 2021

CECA is a signatory to a joint letter to Chancellor Rishi Sunak calling for proposed legislation that will implement reverse charge VAT, due to be implemented at the start of March, to be delayed or halted. 

Our research shows that while most CECA members are ready for the changes, nonetheless a majority would favour a delay to the legislation, and a significant proportion would like to see the policy scrapped altogether.

Members have expressed real concern as to the readiness of the supply chain for the proposed change to reverse charge VAT, with many businesses thought to be unaware of the change, or likely to be hit by serious cashflow problems. Moreover, some members have expressed concern as to whether clients are ready for the change or have failed to confirm whether they count as end users under the new rules.

The trade federations’ letter to the Chancellor is further bolstered by the Construction Leadership Council’s call for the reverse charge to be scrapped, which is amongst its recommendations to HM Treasury ahead of the forthcoming Budget.

Commenting, CECA Chief Executive Alasdair Reisner said: “We have been working hard to ensure our members are ready for reverse charge VAT, which was originally due to come into force back in October 2019.

“This legislation has rightly been delayed more than once since then due to the uncertain economic climate caused by Brexit negotiations, and latterly the impacts of the COVID-19 pandemic.

“We have called on the Government to delay this change, as the economic climate continues remains unstable due to the Brexit transition period and the impact of the novel coronavirus on the whole of society.

“As our sector works to deliver the UK Government’s ‘Build, Build, Build’ strategy, the impact of reverse charge VAT will have a significantly negative impact on our industry, increasing the burden on business and restricting cash flow in an industry where margins are sometimes as low as 1-3 per cent, and where VAT often makes up as much as 20 per cent of an invoice.

“At a time where CECA members are continuing to work to deliver the schemes that drive economic growth and maintain vital services to the nation, we believe the implementation of reverse charge VAT is the wrong policy at the wrong time and call on the Government to  " at the least " further delay the changes until the economic climate is more favourable, if it is not going to scrap the legislation altogether.”

CECA is keen to hear from members about the impact reverse charge VAT will have on their businesses. If you would like to input your views on either a confidential or public basis, please contact CECA Chief Executive Alasdair Reisner.

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