Autumn Budget 2017 - Construction Industry issues

Here we look at the Chancellor’s announcements in this year’s Autumn Budget affecting the construction industry.

Employment status

The government has announced the publication of a consultation as its response to Matthew Taylor’s review of modern working practices. Mr Taylor’s discussion paper has called to question the overall changing trend in the labour market, with the rise in self-employment, innovative forms of working and how the current legislative framework fits with these developments. It also addresses the need for reforms to make the employment status tests for both employment rights and taxes clearer. With this consultation, the government hopes to tackle the complex issues of the “Gig economy”, which will require extensive and careful consideration.

Housebuilding

This budget has heavily focussed on the housing market. SMEs in the housebuilding sector should benefit when the Chancellor provides new money for the Home Builders Fund to support their growth. Over the next 5 years a total of £44 billion is expected to be set aside for capital funding, loans and guarantees in the housing sector. The government intends to deliver an additional 300,000 homes per year by the mid-2020s and unlock strategic sites, new settlements and urban regeneration funded at £1.1 billion. Funds have been set aside for financial guarantees in private house building (£8 billion), a small sites fund (£630 million), a housing infrastructure fund (£2.7 billion) and finally to develop the necessary construction skills (£34 million).

VAT avoidance

Following the announcement of a consultation in the Spring budget 2017 into tackling fraud in labour provision in the construction sector, the government has now set out a timeline for the introduction of a VAT reverse charge mechanism to the sector.

The VAT reverse charge will mainly shift the responsibility of paying VAT to the purchaser of goods or services instead of the provider. This will remove the opportunity for the provider of goods or services to disappear or fail to pay the VAT due. The technical consultation on draft legislation for a VAT reverse charge will be published in Spring 2018. This will be followed by a final draft of the legislation and guidance by October 2018 and the changes will have effect from 1 October 2019.

The long timeline for the introduction of the reverse charge mechanism is to provide sufficient time for business to prepare for the changes.

To discuss how the changes might affect you, please do not hesitate to contact us.