Carpenter not yet registered for VAT

DizzyDasher

Hi All,

Just getting some quotes for a carpentry job in my home.

One of the quotes states that it doesn't include VAT, as they are not yet registered for VAT (a new business). They have however provided various references and quotes from satisfied customers (including contact details), which appear to be for this business (referring to the business by name, rather than just the people who work for it).

Assuming they are a new business and not yet registered for VAT, is it correct that I then don't have to pay it? On this basis they would be a bit cheaper than the other quotes (although one of the rivals is not much more and is more local, so we might go for them).

Is there anything I should be watching out for here?

Thanks!

DD

LandyAndy

Well if they aren't registered for it they can't charge it to you.

Of course if they register before work commences they would have to add VAT.

I don't think it raises any alarms. Small businesses that deal with the public may try and stay below the VAT threshhold because their prices are automatically that much cheaper to people who can't reclaim the VAT

Alan_M_2

Don't be concerned, they seem to be very upfront about it.

Not being VAT registered shouldn't be a stigma for a small one man band type tradesman. He can still turnover circa £70K a year without registering, so if he's sensible and gets his customers to supply the products and he will fit and charge labour only, in which case £70K a year will provide him with a comfortable living after overheads.

tuttifruiti20

Any small business CAN register for VAT straight away, but they don't have to until they're earning (or turning over - I forget which) a certain amount of money.

It's nothing to worry about, a friend of mine who runs a carpentry business is a sole trader and doesn't charge VAT doesn't mean he's no good, just means that he doesn't make enough money to be required to register for it and so doesn't pass the cost of it along to the people who he builds things for.

Just go by the price overall, and the quality of work done before and satisfied customers I'd say.

1984ReturnsForReal_2

Very many aren't registered for VAT & don't need to be also.

Its a measure of how much they invoice not how good they are at their jobs.

It is not a way to judge a tradesman

Alan_M_2

tuttifruiti20 wrote: »

Any small business CAN register for VAT straight away, but they don't have to until they're earning (or turning over - I forget which) a certain amount of money.

It's nothing to worry about, a friend of mine who runs a carpentry business is a sole trader and doesn't charge VAT doesn't mean he's no good, just means that he doesn't make enough money to be required to register for it and so doesn't pass the cost of it along to the people who he builds things for.

Just go by the price overall, and the quality of work done before and satisfied customers I'd say.

Current threshold is £73,000 turnover in any 12 month rolling period.

moonrakerz

Alan_M wrote: »

Current threshold is £73,000 turnover in any 12 month rolling period.

There may be advantages in voluntarily registering for VAT if your turnover is less than£73,000 pa.

You can claim VAT back when you are charged it for your business.
There is also a reduced "flat rate" VAT scheme whereby you charge 20% to your customers but pay less than that to HMRC (used to be 11% IIRC), but there are "strings" attached to that.

It is all detailed on the HMRC website

JasonLVC

moonrakerz wrote: »

There may be advantages in voluntarily registering for VAT if your turnover is less than£73,000 pa.

You can claim VAT back when you are charged it for your business.
There is also a reduced "flat rate" VAT scheme whereby you charge 20% to your customers but pay less than that to HMRC (used to be 11% IIRC), but there are "strings" attached to that.

It is all detailed on the HMRC website

True, but it is unusual to find too many small tradesmen like a plasterer or chippie who is VAT registered.

As their clients will all be home owners and unable to reclaim VAT, it can be to the tradesman advantage not to register for VAT becuase although they cannot reclaim VAT on their costs they will be cheaper than their nearest, VAT registered competitor most of the time and so will likely win more work.

As the other poster mentioned, the work around for tradesmen is to get the client to buy the materials and only supply the labour, this should keep the tradesman well under the VAT threshold and everyone wins (except the Treasury, but its legal so its okay:D).

DizzyDasher

Thanks all! I do think it's a bit weird - it's not a sole trader - it's a small company. Based on the info they sent me they have a couple of managers and 8 or 10 carpenters, so I would have thought they would hit the threshold very quickly.

However, as you say they've been very straightforward about it, so maybe they are just in the very early days (and the quotes may relate to the people rather than the company, despite quoting the company name).

I guess the only alarm bells is if they start to suggest cash payment, right?

System

i've seen a few quotes recently from recent start ups that say something like "i am not currently VAT registered but this may change over the course of the contract" - i wouldn't worry about it yet! at least they are being up front about it...

LandyAndy

moonrakerz wrote: »

There may be advantages in voluntarily registering for VAT if your turnover is less than£73,000 pa.

You can claim VAT back when you are charged it for your business.
There is also a reduced "flat rate" VAT scheme whereby you charge 20% to your customers but pay less than that to HMRC (used to be 11% IIRC), but there are "strings" attached to that.

It is all detailed on the HMRC website

Indeed there may be. I registered our company for VAT pretty much as soon as it was formed because all our clients are VAT registered so they don't care about being charged VAT but we can reclaim 1/6th of our costs.