Funding extension without being hit with VAT

aj9648

Hi

I'm just in the process of starting an extension - the VAT that everyone quotes is a bloody headache!! Why is there VAT on increasing the size of the home!! Not only do you have to pay the builder they slap 20% on top of it all!!

So if I were to setup a new company, could I fund the build through there and then claim the 20% back through vat returns

Is that illegal or immoral?

le_loup

Interesting.
Try it.
Do your car as well ....... and your wine.

aj9648

le_loup wrote: »

Interesting.
Try it.
Do your car as well ....... and your wine.

I'm assuming by your response, it's a stupid idea!!

Apodemus

This is one reason why perfectly good houses get bull-dozed and replaced with "MacMansions" - cheaper to level and start again, than pay tax on the extension.

Pennywise

aj9648 wrote: »

I'm assuming by your response, it's a stupid idea!!

Yes - it's illegal tax evasion and hmrc wouldn't allow it anyway.

uknick

Putting to one side the illegal tax issues, I'm not sure it will be that easy getting funding in the first place to do what you want through a new Ltd company.

Do you have a mortgage on the current building? If so, how do you think your mortgage company will feel having something you don't own attached to "their" building?

How are you funding the extension? If it's not cash, how easy is it to get financing through a brand new company?

You could try to avoid some of the VAT cost by finding a builder who's not VAT registered. But, how many extension builders are there who don't turnover more that 86K per year? Would you trust them to do a decent job?

Finally, something in my distant memory tells me recovering VAT on building work is not as simple as VAT on simple purchases. I believe there are some quite complex rules to allow a company to recover VAT.

aj9648

Ok thanks

Looks like £20k to the hmrc on the £100k estimate!!

Wookey

The only way round it is to learn all the trades involved and build/trim it out yourself and negotiate deals for the materials from various suppliers, now you see how the funds for all the spongers benefits are paid for because they sure don't chase after some very well known businesses for moving tax money offshore as rigorously as they would chase you or me for a few quid of vat.

00ec25

Wookey wrote: »

The only way round it is to learn all the trades involved and build/trim it out yourself and negotiate deals for the materials from various suppliers,

? which he would still have to pay VAT on as an extension is not a qualifying building for zero rating purposes nor for reduced rate purposes

Wookey wrote: »

now you see how the funds for all the spongers benefits are paid for

as opposed to all those honest builders falling over themselves to pay the tax they owe and not do cash in hand deals or "forget" to declare some work for CIS purposes

Wookey

00ec25 wrote: »

? which he would still have to pay VAT on as an extension is not a qualifying building for zero rating purposes nor for reduced rate purposes

as opposed to all those honest builders falling over themselves to pay the tax they owe and not do cash in hand deals or "forget" to declare some work for CIS purposes

The vat would only be payable on materials not on the labour as he would be doing it all himself thereby a huge saving, afaik HMRC don't collect on 20% of zero.

le_loup

Wookey wrote: »

now you see how the funds for all the spongers benefits are paid for

So you weren't born in hospital, never get sick, weren't educated, don't need protection from criminals, don't drive on roads, won't be drawing a state pension.
My, you are lucky.