2 in 3 builders say new Government VAT policy will lead to cashflow issues and confusion, warns FMB

The Government must scrap new tax policy ‘reverse charge VAT’ to show they are listening to builders and protecting jobs, according to the Federation of Master Builders (FMB).

New data from the FMB has found that 66% of builders either anticipate that reverse charge VAT will have a ‘moderate or significant’ impact on their firm’s cashflow, are still unclear on the details of this complicated policy, or have never even heard of it.

When asked what the impact of reverse charge VAT will be on cashflow, builders said:

  • Moderate or significant impact – 37%
  • Minor or no impact – 34%
  • I don’t know what the impact will be – 23%
  • I don’t know what reverse charge VAT is – 6%

Brian Berry, Chief Executive of the Federation of Master Builders, said: “Reverse charge VAT is a damaging policy being introduced at the worst possible time for builders. By removing the flow of VAT money between businesses in the construction supply chain, 4 in 10 builders say this will have a ‘significant or moderate’ impact on their cashflow. The construction industry stands ready to tackle tax fraud, but reverse charge VAT harms all builders for the actions of a minority of unscrupulous firms.”

Berry concluded: “Reverse charge VAT is a complicated policy that it takes time to prepare for. Time being a luxury most builders have not had over the past year, as demonstrated by the 29% of my members who are either unaware of the policy or usure of its impact. The Government is placing a strong emphasis on keeping construction sites open and protecting jobs. If the industry is to continue supporting recovery, the Government must listen to builders and scrap reverse charge VAT.”

Deepak Singh Udassi, Director, City Lofts London, said: “It is important to tackle fraud in the construction supply chain. Due to the little to no regulation in the industry, rogue traders are able to operate freely, to the detriment of consumers and reputable businesses like mine and other FMB members. However, reverse charge VAT is not the solution. A mandatory licensing scheme for UK construction businesses would tackle the root cause of this problem by introducing a minimum barrier to entry. Licensing would also drive-up standards, professionalism and the reputation of the industry, which is clearly not well regarded across Whitehall as demonstrated by this punitive policy.”