The announcement delaying the introduction of the scheme until 1 March 2021 follows an earlier one-year delay until 1 October 2020.

Fearing a negative impact on the industry, SELECT - the campaigning trade organisation for Scotland’s electrotechnical industry- and other UK trade bodies, led by the Federation of Master Builders (FMB), had written to the Chancellor of the Exchequer asking for a further postponement.

The UK Government has now decided that the economic dislocation caused by the lockdown justifies a further six-month delay.

VAT reverse charging means that businesses which are both VAT and Construction Industry Scheme registered will no longer pay VAT to most of their subcontractors.

Instead, VAT will only be paid to firms which supply only labour (employment businesses) and to the merchants and businesses that sell building materials only without any fix.

Alan Wilson, managing director of SELECT, said: “If the changes had been implemented they would have further increased the burden on construction employers and seriously restricted cashflow.

“A further six months’ delay will at least give SELECT member businesses and other companies in the construction sector the breathing space they need to recover from the lockdown and alter their systems and processes.”

John McGhee, SELECT’s director of finance and resources and association secretary, added: “The very idea that, in just under four months from now, the VAT reverse charging scheme would come into effect could easily have been the last straw for many of our members.

“But credit where it is due: the UK Government is to be congratulated for having the foresight to push the changes into next year by which time, we hope, some semblance of normal business will have been restored.”

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