Trades within the construction industry will have to start using a new method of accounting for VAT from the start of March 2021.
New rules are being introduced by HMRC in a bid to tackle VAT fraud and prevent losses to the taxman of up to £100million a year.
The new rules mean that from March 2021 VAT paid between construction companies will be reverse charged, changing the way VAT is handled.
As a result, the contractor will have to pay the VAT which is due instead of the subcontractor or supplier.
The HMRC says it will work alongside the construction sector in the first six months of the new regime to help businesses comply and overcome any cashflow issues caused by the changes.
A spokesman said: "HMRC will be operating a light touch period during the first six months where we will assist businesses that are trying to comply, but have struggled for genuine reasons."
The HMRC Business Payment Support Service are aware that some businesses may require assistance with paying their taxes as a result of the loss in cash flow. Any assistance will depend on the specific circumstances of individual cases, but might include granting businesses more time to pay the tax they owe or arranging an instalment plan.
Guidance on the new rules and help for construction firms worried about the impact on their cashflow can be found here: https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services
And businesses which encounter payment issues can find help and advice here: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/business-payment-support-service
Traders who have further concerns or questions can contact HMRC via: [email protected]