Builder vat fraud

Alan_M_2

With regard to this thread and the OP's situation.

I'd like to see one of this builders invoices, how it's made out and the way it refers to VAT is quite relevant.

With regard to making the cheque to someone else, I don't think this is illegal per se as long as the money is accounted for correctly as far as HMRC are concerned. Also if the builder is a discharged bankrupt he won't be able / find it very difficult to hold a bank account at all. So in that respect I'm not surprised chaeque are being made out to a third party (who may or may not be part of that actual firm itself).

There's a few holes in this situation that need to be addressed before any specific information can be supplied.

Personally I'd be having a chat with HMRC, the problem there is you're falling foul of Data Protection with the amount of information HMRC can discuss with you about the builder.

For information, I have transfered my vat number from a previous (sole trading) business to a Limited Company.

I am also a discharged bankrupt and kept the same VAT number from before bankruptcy which was later transferred to my Ltd company, as I didn't owe HMRC any money it was entirely unaffected.

My bankruptcy was personal (via a sole trading business) and did not effect the Ltd Company. Long story in short , one of my large customers went bankrupt owing me a substantial amount of money and took me with him....a few years back - I operate differently now.

So what the builder is saying is actually plausible but not common. But it's ringing alarm bells.

sunshinetours

Alan_M wrote: »

With regard to this thread and the OP's situation.

I'd like to see one of this builders invoices, how it's made out and the way it refers to VAT is quite relevant.

With regard to making the cheque to someone else, I don't think this is illegal per se as long as the money is accounted for correctly as far as HMRC are concerned. Also if the builder is a discharged bankrupt he won't be able / find it very difficult to hold a bank account at all. So in that respect I'm not surprised chaeque are being made out to a third party (who may or may not be part of that actual firm itself).

There's a few holes in this situation that need to be addressed before any specific information can be supplied.

Personally I'd be having a chat with HMRC, the problem there is you're falling foul of Data Protection with the amount of information HMRC can discuss with you about the builder.

For information, I have transfered my vat number from a previous (sole trading) business to a Limited Company.

I am also a discharged bankrupt and kept the same VAT number from before bankruptcy which was later transferred to my Ltd company, as I didn't owe HMRC any money it was entirely unaffected.

My bankruptcy was personal (via a sole trading business) and did not effect the Ltd Company. Long story in short , one of my large customers went bankrupt owing me a substantial amount of money and took me with him....a few years back - I operate differently now.

So what the builder is saying is actually plausible but not common. But it's ringing alarm bells.

Indeed very difficult in cases where you only know part details, too many assumptions can be made. VAT is a notoriously complicated and detailed tax and doesn't always follow logic, or even other taxes in its pplication despite some of the subjective posting within this thread.

Personally I think the Op has done OK in what he has tried to do so far, and if he kept details of all that had happened and how he had tried to ensure the builder was correctly registered then I can't in reality see him having any problems with HMRC if they investigate the builder

jimbo88_2

Thanks for everyones replies and advice. It is much appreciated! I don't want to drag the thread on any longer, but.....

the builder has said he will issue us the final invoices without the VAT element on it. (Fine). BUT, he wants the final payment now before he has finished off the extension!!! Shall I be firm and say no, you will receive payment when you have completed the extension job?? He says he needs to pay wages...and says if the money is not in his account by tomorrow, then they won't be doing anymore work!!?:( What should I do?? That sounds more like a threat!!

There is not much more to do- the floor in the kitchen, soil pipe and little bits here and there. He said previously in an email that he will finish THIS Weds, but he can't wait for final payment till then?? He wants it in this account tmw!!

I am reluctant to pay him the final payment, as he hasn't finished it! And his own contract states "final 40% on completion of build and site clearance".

Can I say no payment till all has been completed???

CB1979_2

well HIS cash flow is not your problem.

after all he's already had a few extra £k out of you, so IMO there is no "final payment" as you've already paid that in his fraudulent invoices.

macman

How much more convincing do you need to see through this guy? Final payment should only be made when the job is completed, and even then on a larger job it is normal to withold something for snagging.
It's now Monday, if he can't wait 48 hours to pay wages (who pays wages on Tuesday?) then he has major problems.
I would tell him to either finish the job as per contract or sling his hook.Then get someone professional to finish it off.
Have you forgotten that he already owes you around £3K for the VAT he has wrongly charged you for?
If you are determined to throw your money at him, then pay him another 10% of the contract value now, that's a couple of thousand? That gives him no excuses not to come and do one more days work to finish off.

jimbo88_2

I will be firm and say no then- payment after all works have been completed. We don't have any experience of previous builders/extension work etc!!..as i said it's our first house. I didn't want to "upset" him for him to walk off, as we thought it will be more delay and hassle to then bring in a new builder to finsih the job.

He is adamant, that we will have to pay him back for the VAT when he has re-registered his vat number. So, he will email us the invoices for the VAT apparently in a month or so!!? Am so peeved at the moment, as I feel he has the upper hand over us, even though he has been defrauding us!!

jimbo88_2

He has also just emailed over a new invoice, which shows the final amount INC vat
and now excluding the EXC amount on the invoice?
FOR EXAMPLE:
INVOICE NO 446

INC VAT £XXX.XX

Previously:
EXC VAT £XXX.XX
INC VAT £XXX.XX

I asked him, to reissue his invoice with both INC and EXC vat on it, like his previous invoices to us, but he said that HMRC told him not to create invoices with EXC vat amount showing. Just the INC amount showing.

Is this right??....it sounds wrong and like he's trying to fob me off again!!?

suisidevw

Sounds like it.

Sounds like he's getting itchy feet with all this mention of HMRC and wants his cash to just run. DON'T EVEN CONSIDER PAYING HIM THIS FINAL INSTALLMENT. Only release when the job is finished and snagging has taken place.

Oh, and make sure you get the VAT back that you have no doubt already paid on your previous 3 installments. You are going to do this correct?

JasonLVC

You should never pay the builder up front for any work - any reasonably good builder would want payment in installments as they go along but never the final payment and his cashflow problems are his problems.

If you pay him now, he'll be long gone with the overpaid VAT and over charges, leaving you with a half finished job. Have you also considerd reporting him to trading standards?

You should be getting a credit note first for the VAT that was originally charged to you, so insist on a credit note for the value of VAT previously charged......then he can issue you with a final invoice but only AFTER the works have been completed.

If he has now applied for VAT, he can charge you a VAT inclusive amount (ie £117.50 instead of £100 + £17.50 VAT) but this is at the customers acceptance and he should issue you with a VAT invoice once the VAT number is confirmed.

If you do not accept these terms, then he must issue an invoice for £100 and then send you an invoice for £17.50 whenever he gets the VAT number. It is YOUR choice, not his.

If he refuses to finish the job without final payment then I suggest you remind him that non-completion is breach of contract and that you will seek redress in the small claims court for the value of works remaining and that also you will see him in court anyway (regardless of whether he completes or not) for the VAT previously paid to him, unless he pays that also. You're not refusing to pay him, just want the job completed before hand.

To be honest, its best you get shot of this cowboy and get someone else in to finish the job, it may cost a bit more, but in times like this I always focus on the goal (a completed extension/property) so a few extra £££ is smallfry compared to a nice finished job which should then last for years.

On that subject, was there any warranty on the work this builder has done?.

JasonLVC

jimbo88 wrote: »

Am so peeved at the moment, as I feel he has the upper hand over us, even though he has been defrauding us!!

You do not have to pay him any VAT, if he has issued invoices in error and/or backdates his VAT registration to an earlier date....that is HIS problem and you are under no legal obligation to pay backdated VAT invoices (unless your contract with him specifically caveats that should he register you are liable for the VAT - which I don't think is the case here).

I deal with businesses who forget to register for VAT all the time and the bottom line is, the VAT is their problem, not the customers.

The builder will be liable for the VAT and so HE will have to pay HMRC the VAT, so no-one is defrauding the Taxman on this, you get a VATfree job as a result of the error made by the builder. You can help him out and pay it if you want to, but you do not have to in law.