As the likelihood of a crash out, no deal Brexit looms ever closer, raw material prices continue to rise and skilled workers remain in short supply, we can at least take heart from one piece of good news.
HMRC’s decision to postpone the introduction of the VAT domestic reverse charge for construction services is the only silver lining in the current cloud – and even that’s no guarantee that it won’t rain.
A year’s delay is clearly good news, and will give small businesses more time to prepare for a change to the VAT rules that will have such a challenging effect on cash flow, but those 12 months will fly by.
No-one can argue with HMRC’s determination to clamp down on what they have described as “systemic fraud in labour supply chains” by making UK construction industry customers responsible for paying the VAT on materials rather than the supplier, but the timing was far from smart.
Expecting companies like Getting There Groundworks to absorb a major hit on their cash flow in the same month as they face the potential chaos of a no-deal Brexit – and a potential labour shortage in its aftermath – was never going to win the revenue any friends.
It would also have marked the second major change to the VAT rules in six months for smaller firms that earlier had to cope with Making Tax Digital. While many larger businesses already had the software to handle that particular change, others must surely have felt they had jumped through enough hoops for one year.
Credit must go to HMRC for listening to the industry and giving businesses an extra 12 months’ grace. Now they need to make good on their promise to use that time to help businesses like ours get better prepared for the change.
While there seems little chance that they will abandon it completely, the Revenue has said it “will continue to work closely with the construction sector to raise awareness and provide additional guidance and support to ensure all business will be ready for the new implementation date.” Let’s hope they do.