The VAT domestic reverse charge for construction services has been delayed again until 1st March 2021, further slowing down the roll out of this scheme.
In a surprise move, HM Revenue and Customs announced the latest delay on 5 June 2020, one week after stating there would be no delay to the original date of 1st October 2020. The change in stance highlights that the government is taking concerns that business will continue to need support towards the back end of the year seriously and is taking measures now to support and protect key sectors.
This is a welcome announcement and enables businesses to plan ahead and consider their cash flow position over the coming months, confident that the government is playing its part to support them.
The government have clarified that the latest delay is due to the impact of the coronavirus pandemic and that the extra 5 months will allow businesses to recover from the effects of the pandemic in 2020.
The implementation of this scheme is widely considered to have an impact on cash flow to sub contractor businesses in the construction industry scheme and the new start date of 1st March 2021 coincides with the end of the VAT deferral scheme for VAT returns submitted between March and June 2020. This could have a double impact on cash flow and businesses need to plan for this now.
For now, watch this space as the impact of the VAT deferral scheme could force further delays. If you would like to discuss this scheme or if you need any advice please get in touch with our team.
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All the best
The NR Barton team
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