More than 150,000 construction companies are facing a 20% drop in cash flow now the VAT reverse charge scheme is active.

The move means companies in the construction supply chain will no longer receive their 20% VAT payment when they submit bills.

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

The change has already been delayed twice and industry trade bodies have been lobbying hard for another respite and were hoping for a U-turn ahead of this week’s budget.

Chairman of the CLC, Andy Mitchell said: “The implementation of Reverse charge VAT will restrict cashflow in our industry, especially to the smallest firms, at an extremely critical financial period for many businesses.

“This policy risks reversing any recovery industry has made from Covid-19 and will limit the scope for protecting and creating jobs across the UK.”

For full details of the VAT changes and how they could affect you click here.