Home Features Reverse Charge VAT – Agencies and Payroll Companies

James Gilbert of Subby UK considers some of the issues facing construction including Reverse Charge VAT.

“When will it end? Brexit, Covid-19, and now the domestic reverse charge coming into Construction. We have to question is there a complete disconnect between the government and the industry?

Being hailed as the industry that is key to bouncing the economy back to good health, we are now faced with the Domestic Reverse Charges (DRC) that will sadly see cashflow affected and companies having to shut their doors. The communication from HMRC to construction companies has been poor, to say the least, there are still many companies not prepared as they still trying to push through the pandemic. Key areas like when I account for VAT, does it apply to private clients supplies, all add to a long list of worries. I want to address a key area in the supply chain which if not dealt with correctly will lead to a huge dent in a company’s cash flow.

One consideration is utilising a payment company, the majority of payroll companies will still be charging VAT on top of the services they provide, as they are deemed outside of the DRC this means businesses are 20% down. Are you managing this situation appropriately?

As an example, if you’re paying 10 subby’s £1k a week there would be £2k a week in VAT payment, you will be charged this VAT, but you won’t be recouping from HMRC in your quarterly VAT return.  Our advice is talk to your Payroll company about how they can assist, some may have credit terms available that ensure that you do not carry all the cash risk.

With all the above going on, we have put Brexit and the effects it is going to have on our labour force to one side, but we are (if not already) going to start feeling it very soon. As project demands rise so does the need for the boots on the ground to deliver it, now more than ever we need to emphasise how we are managing and treating these men and women. We are already trying to climb a huge mountain delivering new talent into the industry and now we find a large part of our European labour force heading home. Now is the time to change the narrative and see the importance of building the relationship between company and boots on the ground, work towards supporting them in the key areas they need. At Subby we ran a survey last year across Facebook groups and our existing community of tradespeople, what we saw was a common theme that most of the problems they are facing which are causing either lack of faith in the industry or Mental Health issues are stemming from finance; 64% said they wanted support trying to lower daily travel costs and 58% wanted support for the future around mortgages and pension plans.

If we can find a way to collaborate and address these issues, we can build a new image around getting an apprenticeship in construction. Making it more welcoming to young men and women so that it doesn’t just stop at getting a trade, it will go one step further to build a plan for each apprentice we welcome into construction.

www.subby.uk.com

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