Subcontractors in the building industry have criticised the new ‘domestic reverse charge’ changes to the VAT rules introduced by HMRC, arguing that they are leading to delayed payments.

These changes became law during the spring, and they mean subcontractors that form part of the supply chain for the building sector do not get a VAT payment of 20% when submitting bills for payment, as they used to. Under the new system, the client using the subcontractor pays this percentage to HMRC and reclaims it in standard fashion.

Subcontractors are now supposed to receive their VAT cash from HMRC on a quarterly basis, but many are now stating that these payments are not being made as quickly as they should be by the authority. They argue that they have been left in the position of still being expected to pay VAT to suppliers without getting it paid to them by their clients.

This is a difficult situation for businesses that are still trying to recover from a lengthy pandemic, but speaking to an accountant for subcontractors in Goole or wherever they live could help them deal with it.

According to the Construction Enquirer, the boss of one company said:

“We are currently owed more than £35,000 which is a considerable amount of cash flow for a firm like ours. The scheme only came in six months ago and already there are problems claiming back our VAT cash.”

A second boss told the same source that the changes were causing unwanted additional strain to their finances.