Builder has become VAT registered near end of the build

Mistral001

Doozergirl wrote: »

It's the builder that needs an accountant, not the client!

It certainly seems like the builder needs an accountant.

A cousin of mine was in a similar situation a few years ago with regard to VAT being charged by a builder when it shouldn't have been. The builder was very insistent that the VAT was paid. She went to an accountant and they told her exactly what the situation was regarding the law and quickly got it sorted out to her advantage. I am not an accountant but sometimes they can come in handy in disputes like this one.

TheCyclingProgrammer

There’s two issues here.

From the builders perspective they need to account on supplies made after their VAT registration date. Their registration date could have been backdated if they were late registering.

Whether or not a supply is deemed having been made after the registration date or not depends on the tax point. This can vary and isn’t always the invoice date (but often it is) - continuous supplies and payments in instalments could affect the tax point.

The second issue is whether or not he is entitled to invoice the customer for VAT on top of what they have already billed. This would depend on the wording of any contracts/terms. Normally a price charged to a consumer is considered to be inclusive of any VAT if applicable unless the terms state otherwise.

To summarise, builder may be liable to account for VAT on payments made already depending on their registration date but if they didn’t allow for the possibility of becoming VAT registered in their terms and conditions then they will simply have to account for VAT on the payments taken as if they were VAT inclusive. The same goes for the outstanding £1k.