This week there have been further calls for the government to scrap ‘reverse charge VAT’ and also concerns raised that using this new tax policy to tackle tax fraud will penalise reputable firms and not drive out rogue traders.
New data from the Federation of Master Builders (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%; and 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.
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.”