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Reverse Charge VAT came into force in March, after being delayed twice before, and means that customers pay VAT directly to HMRC instead of with their usual bill. This has left a lot of construction contractors paying VAT to suppliers whilst not receiving it from their customers. 

Under this new legislation, subcontractors are left waiting until the end of each quarter to receive the money they are owed by HMRC, having a detrimental impact on their cash flow.

Now, it has been reported that firms are claiming that HMRC is not paying the cash back on time.

One M&E specialist told the Construction Enquirer that: “HMRC still can’t give us a definite date for payment and just say it is being processed and told us not to bother ringing up again to chase it.”

Another specialist agreed with this, adding: “The industry is coping with price hikes, wages hikes and material shortages so working capital can be challenged at times so to have necessary revenues held onto by HMRC via this scheme is just not on.”

In response to these claims HMRC have said: “In most cases claims are paid within five working days of receipt of the return. However, if we select it for verification checks, this could take 30 days or longer, dependent upon how long it takes the customer to provide the information requested to verify the return.”

Is your construction business struggling to cope with the impact of Reverse Charge VAT? Our construction-specific software is Reverse Charge VAT ready and can ensure you are remaining compliant, along with allowing you to submit monthly or quarterly VAT returns to help with cash flow.

If you’d like to find out more, please book your demo today.