Reverse charge VAT for construction services has been delayed by a year, just three weeks before it was due to take effect.
The way VAT is collected in the building and construction industry was due to change on 1 October 2019.
Industry campaigners had expressed concerns that many businesses in the sector were not ready for the changes to be implemented.
To help those businesses prepare, and avoid the measure clashing with the UK's scheduled exit from the EU, the reverse change has been put on hold.
The Chartered Institute of Taxation (CIOT) welcomed the announcement, after months of calling for the reverse charge to be delayed.
It warned of "significant confusion among businesses, leading to disputes between suppliers and customers" over who is liable for paying VAT.
Linda Skilbeck, vice-chair of the indirect taxes sub-committee at the CIOT, said:
"A start date of October 2020 is more sensible.
"This should allow time for a dedicated information campaign to be operated by HMRC, with the assistance of industry and professional bodies."
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