Paying VAT for building work

onlyroz

googler wrote: »

Similar thread;

https://forums.moneysavingexpert.com/discussion/4773908

I wish I hadn't read that :eek:

onlyroz

chrismac1 wrote: »

Some of the posts on here are a joke. Without seeing the contracts, there is in no way enough information to form a judgement on whether any sort of "tax scam" or even avoidance is taking place here.

Well exactly. It's surprising that so many people have jumped in with "it's a scam", or "I wouldn't have agreed to that".

My original question was raised because I've never heard of a practise like this, and unless it's buried somewhere in the small print I wasn't made aware that the payments would be made in this way until just a few weeks before the work started.

From your responses it seems like this practice is not necessarily illegal, but I need to read the contract carefully to find out who would be responsible if there was an accident on site, and who I would need to pursue if I discovered problems with the work once it was all completed.

Either way, apart from the plumbing and tiling it's all just about finished now...

spacey2012

Yes it is a tax scam, the principle contractor is avoiding CIS deductions by getting you to pay them directly, thus avoiding the CIS scheme by pretending you are employing them directly to work on your property.
As you are not doing this, they have all been sourced by the principle contractor the down side is, you will be paying their 30% CIS tax contributions if it gets pulled up where they got the money from and if you have no CIS certificates, you won't be able to claim it back.

Mallotum_X

spacey2012 wrote: »

You are mixed up in a tax scam.

Not necessarily.

If the workers are all self employed, then nothing wrong in "employing" them directly, rather than via the parent co.

This saves - legally - the VAT.

The key issue is around who is responsible for the work carried out and the contract in place. The "parent company" is in effect a project manager on your behalf. But make sure the correct insurance is in place to cover the work done and any injuries etc the workers may have.

chrismac1

Whoever spacey is, he or she clearly is utterly clueless as to how the Construction Industry Scheme (CIS) operates. Firstly, on the face of your posts there are 11 contracts in place right now:

1 between you and the designer / project manager, and

10 between you and each individual labourer / sparky / plumber etc.

If this has been properly set up there is no sub-contract relationship either in substance or legal form between any of the parties. By definition, the CIS applies solely to situations where there is a sub-contract in place in the project.
This project has none, ergo no CIS.

Hence the previous post by spacey2012 is utter tosh and can be totally ignored. In your position, I would take 2 actions from this discussion:

1. Ensure you get proper invoices from people, with their names and addresses, date and details of work done and value. Ideally pay them either by cheque or direct transfer into their nominated business bank account.

2. The health and safety and related insurance issues referenced in the other link.

The first action is your defence against being knowingly part of the "black economy". Also, as other posts in this thread have highlighted, HMRC recruitment policy tends to involve a visit to the monkey cage at London Zoo. So this documentation is also your defence against some twit coming along saying you were a CIS contractor, here is a bill for £5k or whatever for the deductions and the fines for not registering or filing on time.

googler

Chrismac1, what's your take on the situation in the thread I linked to?

chrismac1

Let me put it this way, suppose I was renovating my house. I would either appoint a project manager who had the necessary insurances, or I would get them myself.

I can't believe anyone who has lived through the Safety Jobsworth revolution in the UK in the past 20 to 25 years can think they can do a big rebuild and take a flier on health and safety.

onlyroz

chrismac1 wrote: »

1. Ensure you get proper invoices from people, with their names and addresses, date and details of work done and value. Ideally pay them either by cheque or direct transfer into their nominated business bank account.

2. The health and safety and related insurance issues referenced in the other link.

I haven't got what might be described as a proper invoice - but I have the labour sheet showing what I paid to who, what it was for and when it was paid. Is this enough?

As for the insurance issues, I'm going to go through my documentation with a fine toothcomb tonight. As it stands, though, all the joinery work has now been completed, and it's just the plumbing, tiling and fitting of the bathroom suite that remains. Once that is finished then the building inspectors will be coming round to (hopefully) sign off the work.

chrismac1

Something with the word "Invoice" on it from each tradesman would be nice. Or a sequentially numbered sheet on one of those carbon paper booklets you can buy from stationers for a tenner. That is the minimum standard I advise all of my clients to achieve, anything less and how do they defend themselves against an enquiry saying they are missing loads of sales out of their accounts and tax returns?

onlyroz

From the contract:

1) You agree with us that if you suffer loss or damage as a result of any breach of any terms of this contract by us or as a result of our negligence then our liability in respect of such loss or damage shall be limited to the smallest of the following:

- the actual amount of any loss or damage suffered by you
- the sum of £2,000,000

This limitation shall continue to subsist indefinitely and notwithstanding termination of the contract.

2) We promise to exercise reasonable skill and care in the provision of the services but if any breach of this promise by us causes death or personal injury then we shall accept liability.

3) Our liability under condition 1 shall be to the exclusion of all other liability to you whether contractual, tortuous or otherwise and all conditions or warranties whatsoever concerning the services and materials (whether express or implied) are excluded to the fullest extent permitted by law. Without prejudice to the generality of the foregoing, in no circumstances shall we be liable for any special, indirect or consequential loss or damage of any nature whatsoever.

4) You agree with and accept that with regard to the limitations of our liability set out in conditions 1-3 that such limitations are perfectly fair and reasonable having regard (amongst other things) to the following circumstances:

- that the potential losses which could or might be caused as a result of the breach or negligence are greatly in excess and wholly disproportionate to the amount which we are charging;result of the breach or negligence are greatly in excess and wholly disproportionate to the amount which we are charging
- that we are anxious to keep to as low a level as reasonably possible for your benefit and the benefit of our customers, our charges in respect of the materials and services provided by us.

5) The limitation of liability contained in conditions 1-3 shall extend not only to us but to our employees and duly authorised contractors or agents.

Here, "us", "we" and "our" refer to the limited company, including their authorised contractors and employees.

I get 1 and 2, but 3-5 make no sense to me whatsoever.