VAT for building contractor

Discovery_Shropshire

We are having building work carried out.

The contractor is VAT registered and is charging VAT at 20% on everything.

Some of the subcontractors he is using aren't VAT registered.

A few questions if anyone can help.

1. Should he charge VAT for the subcontractors who aren't VAT registered?

2. If yes, who gets the 20%? Him, them, or the VAT man?

3. Should he charge VAT on insulation materials?

4. Are there any hints or tips to reduce the eye watering 20% the VAT man is taking from me for the work?

Hope you can help:beer:

chrismac1

The way VAT works is simple:

1. You register a business.
2. You charge 20% VAT on everything you do unless you can find a clause in the VAT Act which says otherwise.

In this case you have a reputable contractor who presumably has checked that the nature of the work is such that the standard rate applies. End of story.

Unless the work being done is new build of a domestic dwelling, conversion of a property into a dwelling or the alteration of a listed dwelling, then he is likely correct to apply 20% VAT in my view

TheCyclingProgrammer

Your builder is providing a service and as he is VAT registered he has to charge VAT on that service. That he is using sub-contractors for some of the work is immaterial as their VAT status only matters on the supply between your main contractor and the sub-contractor.

He charges you 20% VAT and (assuming he's on the standard VAT scheme) and it gets passed to HMRC, less any input VAT he has incurred (such as any VAT he has been charged by a sub-contractor).

Any building materials are unlikely to be considered a disbursement in this case - buying materials to use for the job is just part of the contractors overall service so he will have to charge VAT again, regardless of whether the supplier he bought from was VAT registered and charged VAT.

With that in mind, he's not selling you insulation, he's selling you building services which presumably include fitting insulation in whatever he's building so he is correct to charge you 20%.

You could probably reduce the VAT you pay for the insulation by buying it yourself directly as I believe insulation is supplied at a reduced rate of 5% VAT. The same applies to any other materials - if there are some expensive items that you can source from a supplier that isn't VAT registered it would save you money to buy them yourself if the builder is happy for you to do that.

agrinnall

TheCyclingProgrammer wrote: »

You could probably reduce the VAT you pay for the insulation by buying it yourself directly as I believe insulation is supplied at a reduced rate of 5% VAT. The same applies to any other materials - if there are some expensive items that you can source from a supplier that isn't VAT registered it would save you money to buy them yourself if the builder is happy for you to do that.

Assuming that the OP would be buying at the same price as the builder can get - as a consumer he may have to pay full market rate while the builder could be paying trade price. the OP will probably need to speak to the builder to determine if the reduced VAT makes up for the higher item cost.

Cardinal-Red

Hi there's some helpful answers here but they don't cover the whole story.

If he has non-VAT registered sub-contractors working for him, then you could try to negotiate them contracting directly with you for the work. This may not work if he's taking a cut or boosting his price for project management etc. If they bill you directly, rather than through him, then you will not get charged VAT and so save it. (Note I am assuming that they are correctly not VAT registered here!)

This bit is not correct:

You could probably reduce the VAT you pay for the insulation by buying it yourself directly as I believe insulation is supplied at a reduced rate of 5% VAT.

The 5% is available for the supply and installation of the materials by the same person. If you buy them yourself, you'll be charged 20% (assuming from a VAT registered trader) and if he then installs them he will charge 20%.

However if he buys them and installs them (assuming they are qualifying materials, and be careful because not all are) then he can charge 5% on that element of the work.

TheCyclingProgrammer

agrinnall wrote: »

Assuming that the OP would be buying at the same price as the builder can get - as a consumer he may have to pay full market rate while the builder could be paying trade price. the OP will probably need to speak to the builder to determine if the reduced VAT makes up for the higher item cost.

Good point, definitely needs to be costed correctly.

Discovery_Shropshire

Thanks everyone,

I think the replies confirm my thoughts (unfortunately!)

I wonder if the tax man can come round and do some labouring or decorating as I am paying him (or her) more than all of the sub-contractors!:think:

Hey ho.

Thanks for all of your replies.

leveller2911

chrismac1 wrote: »

Unless the work being done is new build of a domestic dwelling, conversion of a property into a dwelling or the alteration of a listed dwelling, then he is likely correct to apply 20% VAT in my view

VAT rules regarding Listed buildings changed around 4 years ago so there is no vat relief on work carried out to Listed properties even if its classed as "alterations/new work". Strangely enough there is still vat relief for the Church....... Which is wrong imo.