Can a company charge me VAT on a part they already paid VAT on?

cashdesk

I received a bill from a plumber and it had the call-out charge, labour and parts. VAT has been calculated on the entire amount.  My question is, if the plumber paid £20 VAT on a £100 part, shouldn't I just be charged the VAT on the £100 for that part? He's charged me VAT on £120 (the part plus VAT), so effectively he's charging me VAT on VAT.

noitsnotme

It’s not really VAT on VAT.  He has paid a price for the part and has then sold the part to you for a higher price than he paid.  Nothing illegal about that but perhaps not the best way to ensure he secures future business from you.

He’s basically made an extra £20 profit from you on the part.  Is that plus the labour cost still a good price to you?  Bear it in mind when deciding whether to call him again for future jobs.

Flight3287462

He has just marked the part up by £20.  Do you expect him to source, buy, store, warrant and pay insurance on his stock for nothing.  Once input VAT and output VAT is sorted it out he will have made a £16 turn.

If you wanted the part for £120 you could have supplied it yourself but of course should the new part fail any further costs repairing or replacing would be down to you.

cashdesk

Thanks, guys. I understand now.

davidmcn

Hunyani_Flight_825 said:

He has just marked the part up by £20.  Do you expect him to source, buy, store, warrant and pay insurance on his stock for nothing.  Once input VAT and output VAT is sorted it out he will have made a £16 turn.

Quite likely to be more than that, as I suspect he'll get a trade discount which isn't visible to the OP.

Flight3287462

davidmcn said:

Hunyani_Flight_825 said:

He has just marked the part up by £20.  Do you expect him to source, buy, store, warrant and pay insurance on his stock for nothing.  Once input VAT and output VAT is sorted it out he will have made a £16 turn.

Quite likely to be more than that, as I suspect he'll get a trade discount which isn't visible to the OP.

I just made the assumption that the price was on the item or rhe plumber just mentioned what he had paid.  But you are quite correct.

bris

He has to pay VAT on the total amount not just the part. So he gets to claim back £20 from the VAT man but he has to pay VAT on the total bill. He doesn't make anything extra the VAT man makes his cut on everything.

unholyangel

bris said:

He has to pay VAT on the total amount not just the part. So he gets to claim back £20 from the VAT man but he has to pay VAT on the total bill. He doesn't make anything extra the VAT man makes his cut on everything.

The OP needs to pay VAT on the total amount. The trader isn't funding that VAT. He isn't even funding the VAT he paid to his supplier since he'll reclaim it. 

The only people who ever pay VAT are those who aren't VAT registered.