BCSA has many substantial member companies who only a generation or two ago were just starting out and are now contributing significant amounts to the UK’s economic growth, productivity improvements and employment. And BCSA’s small and medium sized member companies are individually and collectively contributing to UK PLC. While some of these companies will continue to remain SMEs, others will grow and become large individual contributors to the economy in their own right.
Or will they? Not if the government persists in bringing in new regulations and taxes that affect SMEs and construction sub-contractors disproportionately.
Construction sector sub-contractors have already had to deal with raw material price increases coupled with sluggish tender prices. They are managing skills shortages and the consequential labour cost inflation, and they have put in their own training and apprenticeship programmes to manage this. But as they grow in size and employ more staff, they are hit with the apprenticeship levy.
As we roll into the second half of the year, the government’s reverse charge VAT for construction sub-contractors due to come into force on 1 October will lead to a loss of productivity, reduced cashflow and in the worst cases, tip some companies over the edge.
SMEs will be least able to cope, as they already spend on average 44 hours per year, which is the equivalent to six working days, on VAT compliance.
BCSA has joined 15 UK construction bodies in calling for a six month delay to the implementation of reverse VAT. BCSA has also written to the Chancellor asking the government to use this time to review its decision to impose reverse VAT altogether.
BCSA has calculated that for an average subcontractor turning over £15 million, reverse VAT will mean increasing negative cash flows, peaking at £262,500 in month three of the change.
BCSA believes that the government does not fully understand the implications of yet another financial blow to subcontractors and has not communicated the changes sufficiently to industry. This is borne out by data collected by the Federation of Master Builders that shows that over two-thirds of construction SMEs (69%) have not even heard of reverse charge VAT.
Let’s hope that the government sees sense and reconsiders yet another burden on construction sub-contractors and SMEs, allowing more of those acorns to shoot.
BCSA President and Jamestown Manufacturing
• At the time of going to print, HMRC announced a one-year delay to the implementation of reverse charge VAT until 1 October 2020.