Construction businesses from across Essex and the South East have been given help preparing for the upcoming changes to VAT from Loughton-based, Haslers Chartered Accountants.
The firm hosted a free seminar at its offices in Old Station Road on 3 July, which covered the new VAT system that is due to come into force in October this year.
The reverse charge mechanism places the responsibility on a contractor to account for the VAT on the services supplied by sub-contractors.
The domestic reverse charge (DRC), as it is known, has been used in other sectors with some success, but it is new to the construction sector and its impact is far-reaching.
It means that businesses in the construction supply chain will not be paid VAT on the services they supply. This will mean that the sub-contractor will no longer directly be paid the VAT.
Intended to reduce ‘missing trader’ fraud, by removing the opportunity for fraudsters to charge VAT, the reverse charge will apply to businesses which resupply building services that they receive.
It is thought that its introduction could lead to considerable issues within the construction industry meaning that some contractors may face cash flow issues as many sub-contractors use the VAT paid to them to help fund their own expenditure.
During Haslers’ recent event, Debra Dougal, Head of VAT Advice UK Limited – Haslers’ specialist sister firm – spoke with industry leaders about their concerns and gave a presentation on what the change may mean for them and their businesses.
She said: “Having met with a number of people at this event it is clear that there is still a lot of uncertainty about what these changes mean in reality for the day to day operation of a construction firm.
“Those we addressed with our presentation have gone away with a much clearer understanding of the challenges they face with the VAT Reverse Charge, but we suspect there are many more companies out there who could benefit from our guidance.”
The event was also attended by a number of local accountants who were seeking advice from Haslers to assist their own clients.
In the run up to the changes, UK VAT Advice Limited is offering a VAT Helpline to help other accountants and solicitors assist their clients with this significant change.