Builder vat fraud

Alan_M_2

jimbo88 wrote: »

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!!?

Unless he can demonstrate to you that he is VAT registered by providing a valid VAT number registered to him/his business. Then he can not charge you VAT.

However if he has applied fro VAT registration I'm not sure how this effects the situation, but as already stated, he can't retrospectively charge you VAT.

Phone HMRC tomorrow and get a definite ruling, be specific about who he is and what He said and confront him.

VAT fraud is not taken lightly, they do investigate and take it very seriously.

If the builder is being straight then he has nothing fear, if He isn't being straight a full discussion with HMRC will sort the problem out.

One thing that continues to play on my mind here is that payments are being made by cheque, if someone is knowingly defrauding HMRC they generally don't want any chance of traceable transactions...i.e cheques.

It may well be the case that you have a good builder who is misinformed or actually clueless about VAT and has simply got this wrong. Alternatively he may know exactly what's what and is having a further 17.5% out of you.

Time for a frank discussion with HMRC.

jimbo88_2

JasonLVC wrote: »

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?.

Thanks so much for the information. It is much appreciated- especially about the credit note request! That is very useful to know! I think you're right, we should get him to to leave our extension/house asap....we will pay him once the works have been completed- and not before. As I do have that written in his contract, should he try to fob me off with whatever excuse. I don't know if he will finish it, as he did say if the money was not in his account tomorrow, then they will not be doing any work!

But I have a contract, so he would be breaching it, if he really does choose not to return tomorrow and finish.

He has already told us he won't be doing an extra job in the house, that we originally asked to him to do awhile back.....which is fine, as I would rather give our money to an honest tradesperson anyway. Like someone said here, I think he just wants to take our money and run.

Thanks for everyone's advice/opinions......I don't think I would have the balls to say what he needs to hear, if I didn't get any help from everybody. Thanks again!!

Dr.Shoe_2

CB1979 wrote: »

yeah Dr Shoe, makes a massive difference.

you can't charge VAT on anything unless you're VAT regged.

in essence he's profiting as he won't be passing that charged VAT back to HMRC (that's pretty much what us VAT regged do, are just VAT collectors for HMRC).

What I meant was that some tradesmen make it clear that they are passing on the VAT they paid on their materials however on re-reading the OP's post he was using an invalid VAT number so he is committing fraud.

jimbo88 wrote: »

Not at all- infact, i had 2 cheaper ones, but I chose him because he "seemed" like a decent bloke at the time, and he was more local to where we live!!!

The only problem I have/had, was the extra payment he wanted for the build of the extension out of the blue- no mention of this in writing or during the 4-5 mths he has been working on our house, and that he has been stealing from us under the disguise of vat, when he is NOT vat registered. He was using an INVALID number, and therefore should not be charging me vat on anything.

Indeed.

Alan_M wrote: »

It is a legal requirement for any prices advertised for public consumption include vat.

Only if the tradesman is registered for VAT...

1984ReturnsForReal_2

JasonLVC wrote: »

The builder will be liable for the VAT

Even though he quoted VAT?

JasonLVC

1984ReturnsForReal wrote: »

Even though he quoted VAT?

Well in a courtroom I'd easily argue that a quote including VAT when the builder is not VAT registered is a void/invalid contract. The fact that the invoices contain a false VAT number on them clearly demonstrates a dishonest intent and a contract based on fraud cannot be valid.

But I take your point, at a common sense level if the 'contract' was for + VAT then if the builder retrospectively register for VAT then he is then in a position that he should have been originally and I suppose the contract terms once again become effective and VAT is due....but I'm not sure contract law allows you to enshrine a status when it isn;t there in the first place.

vaio

jimbo88 wrote: »

……..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 wrote: »

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!!?

Sounds just like what he should be doing according to the HMRC info I posted way back in post 108.

Basically if he’s in the process of registering then in the gap before he gets his actual number he should not show vat separately but should increase the invoices by the VAT rate and then reissue them as proper VAT invoices once he’s got his number

JasonLVC

vaio wrote: »

Sounds just like what he should be doing according to the HMRC info I posted way back in post 108.

Basically if he’s in the process of registering then in the gap before he gets his actual number he should not show vat separately but should increase the invoices by the VAT rate and then reissue them as proper VAT invoices once he’s got his number

Yes, but the customer does not have to agree and can insist on a VAT free invoice and a VAT invoice to follow later.

Also, bearing in mind the builder has not shown much honesty so far with false invoices, false VAT numbers, cheques going to third parties.....the OP is right to be cautious becuase if the OP pays this bill (with the VAT not shown but charged) then the OP will not see the builder again, or the VAT invoice and so the builder just pockets the cash (as he has already done so far).

jimbo88_2

"Sounds just like what he should be doing according to the HMRC info I posted way back in post 108.

Basically if he’s in the process of registering then in the gap before he gets his actual number he should not show vat separately but should increase the invoices by the VAT rate and then reissue them as proper VAT invoices once he’s got his number"

Yes, I do accept he has started doing things correctly as from this point forward with any future invoices he creates.....I guess he can't not do things the right way, now that he has been exposed as not being vat registered but charging for it....

1984ReturnsForReal_2

JasonLVC wrote: »

Well in a courtroom I'd easily argue that a quote including VAT when the builder is not VAT registered is a void/invalid contract. The fact that the invoices contain a false VAT number on them clearly demonstrates a dishonest intent and a contract based on fraud cannot be valid.

But I take your point, at a common sense level if the 'contract' was for + VAT then if the builder retrospectively register for VAT then he is then in a position that he should have been originally and I suppose the contract terms once again become effective and VAT is due....but I'm not sure contract law allows you to enshrine a status when it isn;t there in the first place.

But what he will do (depending on the writing of the quote) is credit off all the invoices & re-issue & allocate the payments made to these new invoices or leave on account.

The OP would have no case & the above is legal & OP would have to pay.

JasonLVC

1984ReturnsForReal wrote: »

But what he will do (depending on the writing of the quote) is credit off all the invoices & re-issue & allocate the payments made to these new invoices or leave on account.

The OP would have no case & the above is legal & OP would have to pay.

That's fine. I don't think the OP has ever had a problem per se with paying the VAT, it was just when they discovered that the builder was not VAT registered that it became a problem.

Just becuase a business registers for VAT, doesn't mean HMRC will issue them a VAT number, so until this builder provides a valid VAT number, and bearing in mind his history, I personally wouldn't be paying any VAT element - whether it is shown as VAT or not.

Without becoming boring (and it is easy, trust me), when a business registers for VAT it cannot 'transfer' the VAT number of a previous business to a new one except if it is a Transfer of a Going Concern (ToGC) and this can only happen when the existing business transfers the number over to the new business - it is a simultaneous transaction and so transferring a VAT number takes a few days (HMRC process these quickly for obvious reasons) - our builder here is using his old VAT number which was not transferred over and he knows this.

What is important here is that the OP isn't diddled out of VAT and that the builder pays what is due over to HMRC. Currently, the builder raising a VAT inclusive invoice means nothing and proves nothing and the OP does not have to pay a VAT inclusive invoice if they don't want to - the risk will be the builders in having to chase the OP for the VAT once he is VAT registered.