How is this builder avoiding VAT registration?

jrck2

Hi all,

I hope this is the right section of MSE to post in.

My parents-in-law are having an extension built. It's a big project - about £300,000. It should have taken 8 months, but 14 months in it is still going. Details of all the problems we've had with these builders could fill another few posts, but that's not why I'm posting. The end is in sight now, but there is a possibility they might end up taking the builders to court.

They chose these builders on a recommendation (now retracted!), and because they gave the cheapest quote. These builders are not VAT registered. According to the builders they are getting around this by putting the money through various sons/brothers (it's a family firm). However, the >£200,000 paid by my parents-in-law during the last year has all been paid to the same bank account, and the invoices have all had the same details.

This project is way above the VAT threshold, and I know these builders were working on another project for most of last summer as well.

Is it possible they're legitimately not VAT registered? If so, how? Or are they avoiding VAT registration through some illegitimate means?

Cheers,
Jack

phill99

As a builder, there is no way they can be legitimately not registered for VAT if £200k has gone into the same account.


TBH if they wanted your parents in law pay different family members, that should have flagged something up.

TheCyclingProgrammer

I can't think of a way they can't be VAT registered either. It's not really your problem - good ammunition if you have to take them to court though.

Annie1960

It is legitimate for sole traders who work together to put turnover through different accounts to keep below the VAT threshold. There is nothing wrong with this, but it should usually go through different bank accounts.

In the case you describe, it seems as though all the payments are going to one account, and then being divvied up among the various sole traders. Whether or not they are related is not relevant.

From what you say, it appears that the person who runs the account should be VAT registered.

Some builders I have dealt with in the past appear not to understand that, if they hire subcontractors, and the customer pays the main builder, then this counts towards the main builder's VAT threshold, regardless of whether this payment is then passed on to the subcontractor.

https://www.gov.uk/report-vat-fraud

It is difficult to tell whether some builders are knowingly evading VAT, or whether some of them genuinely don't grasp the concept of turnover.

Doozergirl

No valid reason at all.

Even attempting to put the money in different company names etc, keeping turnover of each under the VAT threshold is fraudulent. If those companies/traders are linked and performing the same role. they are counted as one and the same for VAT purposes.

Separate trades producing separate invoices paid to separate accounts is acceptable but they are not "subcontractors", they are each contractors in their own right and clients must be aware that there cannot be one over-arching contract. Any subsequent problems will end up having to be dealt with separately and there is the risk that goes with this.

Any over-arching contract or single agreed price makes the contractor liable to pay CIS tax on behalf of subcontractors, as well as VAT being chargeable.

I cannot fathom how anyone with a £300,000 project could think that it wouldn't involve VAT. People choose not to consider it too hard.

trailingspouse

What he does with his VAT is his business - but I would be wondering what else he isn't bothering with. Is he insured? Does he follow Health and Safety procedures? And so on and so on.

Doozergirl

trailingspouse wrote: »

What he does with his VAT is his business - but I would be wondering what else he isn't bothering with. Is he insured? Does he follow Health and Safety procedures? And so on and so on.

And what Starbucks does with their corporation tax is their business? We all have a responsibility, whether it is a legal one or just not enabling people when it conveniently suits us too. It is possible to be complicit in VAT fraud.

southcoastrgi

& bare in mind that if they were your folks would have paid £60,000 more for their extension

Annie1960

trailingspouse wrote: »

What he does with his VAT is his business - .

In a civilised society everyone needs to pay their taxes.

Society needs roads, schools, hospitals, police force etc, and these are paid for by taxes. It is everyone's business when some try to evade paying, as we all suffer.

System

Presumably this contactor was able to give the cheapest quite because they are not charging VAT? Funny that this hasn't been an issue until they are far into the job and there's some issues...
Seems very clear they aren't servicing their vat commitments, but the big question is, will you report them and hope they don't get shut down before the extension is complete or wait until they've finished before dobbing them in?!

Aylesbury_Duck

Annie1960 wrote: »

In a civilised society everyone needs to pay their taxes.

Society needs roads, schools, hospitals, police force etc, and these are paid for by taxes. It is everyone's business when some try to evade paying, as we all suffer.

Bang on. These forums are full of people complaining about potholes, overgrown verges, slow planning decisions, lack of traffic enforcement and so on. Keen to save the VAT though.