Subcontractors still waiting too long for VAT repayments

Specialist contractors are still having to wait months before they receive reclaimed 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 first contacted the Enquirer over the summer claiming HMRC is not paying the cash back quickly enough.

And subcontractors are still being left waiting and suffering a hit to their cash flows.

One M&E specialist said: “We are still waiting on our April quarterly refund plus the latest quarter with around £1m of working capital revenues tied-up.

“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 added: “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.”

An HMRC spokesperson said: “HMRC aim to make VAT repayments within 30 calendar days of receiving a return.

`’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.”