How is this builder avoiding VAT registration?

Stevie_Palimo

macman wrote: »

To place a £300K building contract on the basis of a single recommendation, and no real research into their structure or finance, does strike me as incredibly cavalier.
If the extension costs £300K, then how big is the existing house?

At last someone else who believes that a 300k extension is both stupid to have just gone ahead with and also extension the size of a decent family home will have to be pretty spectacular or lavished with very high end fixtures and fittings.

Nonsense this thread in my view and as for VAT worries that would be the least of a home owners concerns with this much money involved, The VAT implications are down to the builder and if they wish to carry on regardless in the hopes of evading what is due to be paid then they will come unstuck.

Also if running through a personal account as it would be seem may be the case the bank may also get on and close the account as running a business through personal accounts is frowned upon by them.

Then you have HM customs and excise who will as a general rule will catch up with the vast majority of people that try and avoid what they should.

Of course I could be wrong as to this being a made up situation and if that is the case then the people who hired the builder are foolish for looking at such vast savings on major works I mean if this is the cheapest quote with no VAT involved then just add the VAT and it is 360k so any other quotes here may have been upwards of 400k plus, That is one large extension and anyone with a brain looking at these amounts would surely do sufficient home work on any potential builders prior to giving the go ahead.

lstar337

Stevie_Palimo wrote: »

Then you have HM customs and excise who will as a general rule will catch up with the vast majority of people that try and avoid what they should.

Unless you are a large multinational, then you have no worries.

Private_Church

Stevie_Palimo wrote: »

Also if running through a personal account as it would be seem may be the case the bank may also get on and close the account as running a business through personal accounts is frowned upon by them.

Agree with your post apart from the above............ I'm Registered for VAT and have run my business from a personal account for over 20yrs and the only reason banks want to move a personal account over to a business account is because they can add charges for every cheque written or charge when paying cash into the bank. Business accounts are there purely to benefit the banks and there is no legal requirement to run a business through a business bank account.

My banks (HSBC) Once tried to get me to change to a Business account and I said no and if they insisted I would move banks.

Furts

Private_Church wrote: »

Agree with your post apart from the above............ I'm Registered for VAT and have run my business from a personal account for over 20yrs

I know a limited company that runs everything through a private bank account. It means they do not pay bank charges.

J_B

Furts wrote: »

I know a limited company that runs everything through a private bank account. It means they do not pay bank charges.

We have three personal accounts with Nat West - when we set up a Limited Company, we thought it 'proper' to have a business account.

All three of our private accounts have a 1K overdraft facility, the business a/c did have a 500 o/d for the first 12 months but if we wish to continue with that, we will need an 'arrangement fee' :eek:

We declined the offer!

TheCyclingProgrammer

Furts wrote: »

I know a limited company that runs everything through a private bank account. It means they do not pay bank charges.

It also means they are a) probably violating their banks terms and conditions and b) opening them up to potential tax issues if they are holding money that belongs to the company in a personal account (because HMRC could potentially deem the money to be a director's loan triggering all kinds of BIK/interest/tax implications). A very silly idea.

Furts

TheCyclingProgrammer wrote: »

It also means they are a) probably violating their banks terms and conditions and b) opening them up to potential tax issues if they are holding money that belongs to the company in a personal account (because HMRC could potentially deem the money to be a director's loan triggering all kinds of BIK/interest/tax implications). A very silly idea.

I do not know the exact details, but I am conversant with the basics. It is a limited company and the account says so. The banking terms are agreed with the bank so the charge structure and interest paid to the limited company is on good private banking terms. Basically the bank treats it as a private account, the paying in books are those with a private account, direct debits come out and so on.

owitemisermusa

Interesting conversation.
Can I ask a related question? For builders, isn't vat the flat 20%? I ask because I've been quoted a 20% VAT on a job I've priced up. £11200 becomes £13440 with vat.
Thanks in advance.
OMM

Doozergirl

The rate charged to the consumer for building work on an existing home is 20%, as most things are.

You're probably not interested in how VAT is accounted for when it goes to HMRC, but I was talking about the flat rate scheme which some companies use to pay HMRC. I believe that builder charges the client 20% and pays 12.5% of VAT collected to HMRC. The rest is assumed to be paid out to suppliers for materials, overheads or VAT registered subcontractors.

I'm not 100% sure as don't use that scheme, I pay HMRC on the exact balance between VAT in and out, which works out for me at around 8-10% of the customer's net invoice (40-50% of VAT collected by me on behalf of HMRC).

Yawn inducing stuff, not relevant to the consumer. But if you aren't VAT registered, you still pay VAT to suppliers even if you don't collect and this has to be factored into the client's invoice, it just can't be 'reclaimed' by the contractor. If a non VAT registered builder charges one amount, it doesn't actually sit that a VAT registered one would charge the same plus 20%.



Or something . I know it in my head.

owitemisermusa

Doozergirl, thanks a lot. Headache inducing stuff though. Lol!