The Federation of Master Builder (FMB) is calling for a delay to the implementation of reverse charge VAT, which is set to go into effect on 1 October.
The reverse charge VAT will see the customer pay the VAT due directly to the HMRC, the charge applies to both commercial and some domestic services.
The charge covers everything from building and construction work, to decorating and cleaning services, and will apply to individuals or businesses registered for VAT in the UK.
Brian Berry, CEO, FMB, said: “The fall in construction activity for the third month in a row and business optimism being at its lowest levels since 2012 means the building industry is heading towards crunch time.
“The government must immediately postpone its plans for a complex and burdensome tax change if the supply chain is to start to turnaround its consistent decline.”
He added: “The time is not right to implement reverse charge VAT, which would restrict cashflow and add extra administrative burdens which risk sending small businesses to the wall. The Government’s guidance on the policy is confusing and complex, and it wasn’t published with enough time for companies to prepare.”