This marks a major change in the way that VAT is collected in the industry and now means the customer receiving the service will have to pay the VAT.
The Federation of Master Builders (FMB) has claimed that the government must delay the implementation to avoid “chaos” as its data found that 67% of construction SMEs are not prepared for the changes.
Specialist lender Oblix Capital has also contested the government’s decision, stating that a lack of awareness could leave construction firms paying more VAT than they should.
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“At Oblix Capital, we’re concerned that the new VAT rules have not been well publicised,” said Richard Payne, director of development at Oblix Capital.
“Property developers and smaller construction companies may not understand how their VAT responsibilities will change from 1st October and they could lose out financially as a result.”
Brian Berry, chief executive at the FMB, added: “Construction companies are already struggling with Brexit uncertainty, sky-rocketing material price rises and skill shortages, and reverse charge VAT is yet another thing for them to deal with.
“What makes things worse is that HMRC has failed to deliver on its promise to help the industry to prepare.”