Subcontractors hit out at HMRC over slow VAT repayments


Specialist contractors have hit out at HMRC over the time it takes to reclaim VAT payments following a controversial change in the tax regime earlier this year.

The “domestic reverse charge” change came into force in March and means companies in the construction supply chain no longer receive their 20% VAT payment when they submit bills.

The VAT cash is instead paid direct to HMRC by the customer receiving the service who will reclaim it in the normal way.

That has left a lot of specialist contractors no longer receiving VAT payments from customers but still paying them to suppliers.

In that situation subcontractors become known as “repayment traders” who are owed money at the end of each quarter by HMRC.

Firms have contacted the Enquirer claiming HMRC is not paying the cash back quickly enough.

One M&E boss 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.”

Another subbie said: “It is totally unacceptable.

“The whole scheme change was a hit to our cash flow and now this is making things even worse.

“We will be running VAT deficits each quarter which puts us under unnecessary pressure.”


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