Builder not VAT Registered - how will this affect what I pay?

jenny-wren

We've been given a very reasonable quote from a builder for some internal renovations. The builder says he's not VAT registered and his estimate does not mention VAT. Can he charge us VAT if he's not registered or is what is on the quote what we will pay?

We have a choice of buying doors and radiatiors ourselves for him to fit and obviously we would pay VAT on them as retail customers.

If we tell the builder what doors and radiators we want will he have to pay VAT on them if he gets them from a builders suppliers (and then pass the cost of any VAT on to us)?

Grateful for any advice!

keystone

If he is not registered for VAT (turnover less than £ 70k per annum this year) then he doesn't charge VAT on his services. You will of course, pay VAT on the goods and materials that he buys for the project or which you buy yourselves.

It is his problem to decide when or if he will exceed the VAT thrteshold and if he thinks he might he is duty bound to charge it and pay it to the government.

The point about VAT is that it is only payable ONCE. So if he were charging you VAT on the whole job he would deduct the VAT that he has to pay on all goods and materials before including them on his invoice to you. He then claws back the VAT he has paid from the Government and submits the VAT payment showing on his invoices in the reverse direction. That way it doesn't get paid twice.

Any Quotation that does not mention VAT is deemed to include it if its payable.

So the answer to your third paragraph is Yes.

Hope that succinctly explains the whole situation.

Cheers

kabayiri

Our builder worked like that. He was not VAT registered, and we paid for all materials through a couple of well known builders merchants. All these invoices included VAT on the materials.

He ran his method of working past a qualified accountant. There is nothing wrong in what he does, but of course if he breaches the threshold he has a duty to comply with regulation.

I guess it suits the smaller trader.

grizzly1911

If you buy the doors/radiators yourselves it helps the builder in two ways.

1.) Helps his cashflow in that he isn't having to arrange payment for them.

2.) By not having to include them in his bill it reduces his turnover, charging just for the labour, keeping him below the VAT threshold.

Point 2 benefits you as you save 20%.

As the PP says either way you pay the VAT on the materials.

har0ld

Either way you pay the VAT. The only time there is a saving, is where a VAT registered builder does you a deal for cash. This usually means that the builder will still claim the VAT on his material costs but not invoice them to you and just pocket the cash you give him. This is illegal, the builder always gets caught and you are legally liable for the VAT that should have been paid.
Hope that this helps (ex VAT inspector)

grizzly1911

har0ld wrote: »

This is illegal, the builder should always gets caught and you are legally liable for the VAT that should have been paid.
Hope that this helps (ex VAT inspector)

Edited - Not a builder.

keystone

har0ld wrote: »

Hope that this helps (ex VAT inspector)

Crikey - you get about a bit don't you?

Cheers

chunkychocky

har0ld wrote: »

Either way you pay the VAT. The only time there is a saving, is where a VAT registered builder does you a deal for cash. This usually means that the builder will still claim the VAT on his material costs but not invoice them to you and just pocket the cash you give him. This is illegal, the builder always gets caught and you are legally liable for the VAT that should have been paid.
Hope that this helps (ex VAT inspector)

Not if the builder has a turnover low enough to be under the threshold to be VAT registered, which he has said is the case.

So it will save you having to pay VAT on his labour, though you can't get around paying VAT on the materials.

geri1965_2

chunkychocky wrote: »

Not if the builder has a turnover low enough to be under the threshold to be VAT registered, which he has said is the case.

So it will save you having to pay VAT on his labour, though you can't get around paying VAT on the materials.

Yes, you'd think an ex VAT inspector would know that really.

prowla

Is it possible for a builder to turn over less than £73k?

From HMRC: "If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £73,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. "

Now, if the customer buys the goods then that doesn't count as turnover (because the builder is only selling the service), but if the builder buys them and charges them on then that does.

grizzly1911

prowla wrote: »

Is it possible for a builder to turn over less than £73k?

Depends on your builder and what types of work he wants do and how he engineers it.

He may feel it is not worth the aggro to push themselves over the threshold from an admin, accounting, impact on cashflow and competitiveness point of view.

If say £50000 was "labour" for instance, once expenses have been massaged even within the law, then that would be a good wack across the majority of the country.