What does this mean for the construction industry?

The Domestic Reverse Charge (DRC) for the construction industry has been delayed again by five months to 1st March 2021.

The introduction of the VAT domestic reverse charge is one of a series of measures to increase the funds collected by HMRC by catching those looking to avoid fulfilling their tax obligations. The new rules reduce fraud or theft when it comes to disclosing VAT.

HMRC have however decided to delay the implementation of the new regulations again, citing a lack of awareness of the changes, along with a desire to ensure businesses were adequately prepared. If only they’d insisted that everyone in the industry attended our webinar!

The delay allows businesses more time to adapt to the new legislation and also prevents further confusion and a hit to cashflow when businesses have already been hit hard with the global pandemic.

Read more about what Domestic Reverse Charge is

The delay will come as a welcome relief for many in the industry. But whilst the heat is off for now, this change is still very real.

It doesn’t meant businesses should just forget about this legislation. Now is the time for you to get up to speed so you are ready for the implementation on 1st March 2021.

If you didn’t attend our Domestic Reverse Charge webinar or started making preparations in anticipation for the 1 October 2020 deadline originally, you need to start looking at this soon.

The domestic reverse charge will have a significant impact on VAT compliance and cash flow management for the businesses involved. New systems and processes will need to be introduced or current systems and processes will need to be amended in order for businesses to be able to implement the new rules.

Smaller sub-contractors may currently rely on the positive cash flow in respect of the VAT element of contract payments which will disappear in relation to reverse charge supplies.

If you’d like our support in helping you prepare, or are interested in our cashflow improvement service, which is specifically designed to help you plan ahead and avoid problems including for example, looking at the speed of your invoicing process, negotiating supplier payment terms, the impact of a poor credit rating and the root causes of cashflow difficulties.

To speak to one of our Principal Advisers, contact us for a free discovery session at discovery@a4g-llp.co.uk or call us on 01474 853856.

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