Builder vat fraud

JasonLVC

jimbo88 wrote: »

UPDATE: Email back from builder:
"I have spoken with HMRC today and i / they are looking into this ref the vat number worse case scenario i will have to re register and back date with them so at this present moment in time you are not required to pay vat untill if required i am issued with a new vat number but if this is the case then the vat will be payable."

Do you think he really is able to re-register??...and back date?...and then charge us afterwards for the backdate vat??

A trader can certainly backdate their registration but then they'd have to account for VAT on all the income they earnt from that date.

(ie, I can register for VAT from Nov 2009, but put the forms in today. HMRC will backdate my VAT number to Nov 2009 but if I had earnt say £10k since November 2009 to today, I'd be liable to pay over the VAT on that £10k which is £1,750 and I'd be unable to recharge that onto my customers as those contracts have already been completed/paid for.)

Of course if all the income I "earnt" from Nov 2009 was paid into my girlfriends account then technically I'd have no VAT liability at all as I, personally, haven't earnt anyting since Nov 2009;).

Sounds like the builder realises he's been rumbled and is backing off. Arguably, if he does register for VAT then I'd expect the project to be reduced in cost becuase now the builder can reclaim input tax on all his purchases of bricks, materials and equipment meaning his overheads are now less, so he can reduce his profit margin on the job and charge you less.

If the builder registers for VAT retrospectivly, you still have no obligation to pay any VAT he attempts to charge you because he original quoted you with no VAT. This does happen on occasion where a legitimate builder goes over the threshold mid-job and usually you can persuade both sides to agree a 50/50 split on the increase caused by the VAT - as it's not your fault he went over but not fair for the builder to stump up VAT simply becuase of the timing of the job, bearing also in mind the job costs will be reduced for the builder who can now reclaim VAT on all those purchases.

I'm not suggesting you do this here as this builder is clearly giving you the run-around so why help him, but for general tradesmen, I think it fair to meet them halfway as they're just trying to survive like the rest of us.

You may also want to point out that from 01 April 2010 it is an offence to issue a VAT invoice that is not valid (ie, no VAT number/not VAT registered) and is punishable by fines whether the trader is VAT registered or not :-

http://www.hmrc.gov.uk/about/new-penalties/faqs.htm#48

See Q48 and then see Q55 for the penalties which can be 100% of the VAT 'charged' by the tradesman plus the VAT he 'charged' as well....a double whammy!.

So print those pages out and fax them to him becuase if he is thinking of issuing you another VAT invoice with another 'false' VAT number on it, this'll make him think twice.

JasonLVC

plumb1 wrote: »

Hung,drawn and quartered,already:eek:

There could be a simple explanation, have you asked him if the vat number is correct? printing error etc???

Why do you want the Vat back? You would have to pay this to any other builder that is registered,by wanting it back you too are defrauding the revenue out of tax.Let the vat and tax man sort it out and you will have nothing to worry about.

The OP has queried the VAT number a couple of times and has had a different excuse each time, first it was 'transferring', now builder has confirmed that he doesn't have a VAT number and has confirmed they will not charge VAT.

The OP has also paid an unrelated party for the work so far (builders girlfriend) so is slightly implicit in allowing themselves to be ripped off somewhat. Clearly, this builder is a crook, no doubt about it.

If the OP has already paid over VAT for previous installments then that VAT has NOT gone to HMRC but is in the builders pocket (or indneed, his girlfriends) and so the OP is legally entitled to have that VAT paid back by the builder to the OP....until such time as the builder can prove he is VAT registered.

This whole false VAT number and charging for VAT anyway, remains commonplace and is fraud. The OP doesn't mind paying VAT if it is going to the taxman, but it is quite clear the builder has simply 'added VAT' and is earning another £££ as a result.

This also means another, more legit builder who charges VAT loses jobs becuase he is more 'dearer' than the builder who sticks VAT on a job at the last minute when they are not even entitled to charge VAT - whereas the legit builder has a VAT inclusive price from the very start but is priced out becuase of this.

sunshinetours

JasonLVC wrote: »

It is possible to request HMRC transfer a VAT number from one company to another but when transferring the number, the new owner of that number takes on any debt/liability of the previous owner of that number and so it is very rare for you to see VAT numbers transfer.

If the previous business was bankrupt, it will likely have owed £££ to HMRC and so only an idiot would transfer a VAT debt from a Ltd Co into a new one!.

...Or a poorly or non advised one!

Does depend also on the original eet up. If sole trader then VAT registration covers that person not that business, so all businesses owned by that person would effectively be registered.

Whole thing sounds slightly suspicious, although if the guy is now in partnership obviously cheque payable to partners name could be OK

Hmmm hope its not one of my clients...:)

sunshinetours

Calm down dear,lol:D

Perferctly calm squire I thank you!



I've read my " VAT in the Construction Industry" from HMRC and can't find anywhere where it says this.

Maybe you could help me out and post a link?

Hmm will have look Monday when back in the office. Its the same principle as any retailer dealing with Joe public ie tyre centre all prices should be quoted inc VAT. You may be right that it might not be down in Tax law, just best practice. I'm not a VAT specialist, I have others who deal with that!

Premier_2

jimbo88 wrote: »

I forgot to say that making the cheque out to his gf is not as "clear" as you make it sound. This is because, as an example: The company are called "S&S Builders". The builder is called A.Smith and we made a cheque out to a B.Saunders, so you can see that this "could" look perfectly normal? It's not like we made a cheque out to someone totally random sounding! Which is why, we did not know the person we made the cheque out to was his gf. (until a later stage when he disclosed her name, possibly without realising, I don't know)....

The builder trades under the name S&S Builders, the builder himself is called A. Smith and you were asked to make out a cheque to B Saunders and you don't think that sounds like a totally random name but perfectly normal??? :eek:

Premier_2

sunshinetours wrote: »

Agreed but as I said it depends on what contract said and whether VAT was actually split out. ...

As I said

Premier wrote: »

A builder, or anyone else, cannot add VAT to their bill unless they are VAT registered...

If the builder is not VAT registered, the bill should not mention VAT at all

Premier_2

jimbo88 wrote: »

Well, there is the small matter of the building certificate at the end?...which he probably won't hand over if it gets too sour?....

Hopefully you haven't paid the builder up front?

If the builder doesn't complete the job as per contract, which presumably includes all necessary documentation, then he doesn't get paid. Hopefully you are holding back more than enough money to get the job completed elsewhere should the builder walk off and not complete the work as contracted.

Anyway, how will the builder know it's you that reported him? Presumably he's got more than one customer and he hasn't singled you out for this scam he's operating???

CB1979_2

Premier wrote: »

The builder trades under the name S&S Builders, the builder himself is called A. Smith and you were asked to make out a cheque to B Saunders and you don't think that sounds like a totally random name but perfectly normal??? :eek:

i'm VAT regged, but don't have a business bank account.

so my company called "CBS-CAD", but i had payments in cheque to my personal bank account (Chris Bxxxxxx).

so why can't this be Smith & Saunders Builders for instance??

to be honest it doesn't matter where you make payment as long as you have a receipt you've paid then the accounting side is their problem.

leveller2911

I remember when I applied to become VAT registered I was told by HMRC NOT

to raise any VAT rated invoices until I had been issued with my number.I don't understand how he can "back date" any invoices because he clearly won't have a number. Surely from what the OP has said he,s commited fraud end of?? and the first thing he should do is refund ALL the VAT on the labour that he has charged and should only begin charging vat when he,s been issued with his number..... I smell something here and its not fresh.;).

Dr.Shoe_2

Hang on. Is he defrauding you or the chancellor of the exchequer?

When he buys all his materials he has to pay VAT. When he buys tools he has to pay VAT. When he puts petrol in his van he has to pay VAT.

His invoices may well "include VAT" but how do you know that the VAT includes labour costs? If he invoices you a cost and then adds VAT to that to arrive at a total then he is committing an offence but not against you.

Even having you pay the cheques to his GF is not an offence against you but if he is doing it to defraud the HMRC then it is not your problem.

Sometimes builders take other smaller jobs and do these in between times, sometimes he may order materials that are in short supply and while waiting for these he may go off and do other things. Really he shouldn't but this is a real world not an ideal one.

I'm guessing you took the cheapest quote, am I right?