Subcontractors who have experienced lengthy delays in getting VAT payments they are owed since the introduction of the reverse charge scheme are to be compensated for this by HMRC.

The government introduced this scheme at the beginning of March, and it means that many subcontractors are now required to receive refunds on VAT from HMRC, rather than from their clients. However, many have reported that the tax authority has been slow to send out these payments, which has left them with severe cash flow problems.

This was the subject under discussion during a recent meeting between HMRC and the organisation that represents subcontractors within the building industry – Build UK. The result is that the former has agreed to recompense those whose businesses have been impacted.

Cash flow is a common problem for many smaller firms, but one that accountants in Goole or anywhere with business expertise can advise on.

Speaking to Construction News, a Build UK spokesperson stated that:

“Multiple members have experienced slow payment by HMRC, which has caused cash flow pressures. In response, HMRC has confirmed it will compensate companies where payments take longer than 31 days.”

The spokesperson went on to add that those firms that had applied for deferrals on their VAT payments would be able to prevent outstanding payments from being offset by getting in touch with HMRC.

David Savage of the Charles Russell Speechlys legal firm said that it was further evidence that the tax authority needed to look at speeding up its internal processes.