Section 75 - Purchases over £30k

ecw19

Hi, hoping someone can help clarify the S75 rules for us! We've been stung before with a company taking a large deposit and then going out of business, but successfully recovered all our costs via our credit card under S75.

We're now planning some building work and have been quoted £26k exc VAT and so we want to make sure we're protected in case anything goes wrong again.

Does the £30k limit for S75 protection include or exclude VAT? Including VAT we're above the limit so what other ways can we protect our deposit? We're being asked for 50% in advance and 50% on satisfactory completion, so I am assuming the S75 rules apply to the total value not the amount paid, is that correct? The work being done is two separate projects so if we're invoiced separately and each project is individually under £30k are we covered for both? Thanks in advance!

eskbanker

The Section 75 value limits apply at item level, so if you're looking at two projects each below £30K (including VAT) then as long as the contracts and invoices reflect this you should be covered for both....

[Deleted User]

The limit includes VAT if you're paying it.

If the work can be clearly split - and invoiced - as two separate sub 30k purchases, that would be the safest way forward.

Sandtree

ecw19 said:

Hi, hoping someone can help clarify the S75 rules for us! We've been stung before with a company taking a large deposit and then going out of business, but successfully recovered all our costs via our credit card under S75.

We're now planning some building work and have been quoted £26k exc VAT and so we want to make sure we're protected in case anything goes wrong again.

Does the £30k limit for S75 protection include or exclude VAT? Including VAT we're above the limit so what other ways can we protect our deposit? We're being asked for 50% in advance and 50% on satisfactory completion, so I am assuming the S75 rules apply to the total value not the amount paid, is that correct? The work being done is two separate projects so if we're invoiced separately and each project is individually under £30k are we covered for both? Thanks in advance!

As long as it is truly two projects with two contracts and two invoices then you have no issues.

The law is arguably fairly vague and with the length of time its been around there must be a lot of caselaw but no one here has even been able to point to it and at best a few Financial Ombudsman decisions. It does seem to be very arbitrarily how the invoice presents so a "pallet of widgets" for £9,999 is covered but "101 widgets on a pallet" for £9,999 isnt because thats £99 per widget 

The separate contracts may not be strictly necessary but if you want the best chances of protection you need to show they are truly separate items and not an artificial division to game the rules. 

bris

It's likely they would see through it. If they are linked, as in you can't have one without the other then you would struggle to claim two seperate items.

In fact lets take a suit as an example, if you have a jacket at £60 and a pair of trousers priced at £40 then S75 doesn't apply, but if they are linked by calling it a suit the the £100 total is covered.

In your case the opposite is true, if you can't have one without the other then its not two seperate items.

So a bit more information is required.

ecw19

bris said:

It's likely they would see through it. If they are linked, as in you can't have one without the other then you would struggle to claim two seperate items.

In fact lets take a suit as an example, if you have a jacket at £60 and a pair of trousers priced at £40 then S75 doesn't apply, but if they are linked by calling it a suit the the £100 total is covered.

In your case the opposite is true, if you can't have one without the other then its not two seperate items.

So a bit more information is required.

Thanks everyone for your responses! The projects can be split into building work and landscaping / laying decking, each could be done without the other but for convenience we're having the same company doing both at the same time. Hope that helps clarify!

born_again

Odds on that CC would argue that it is all part of the same project if same company are doing it at the same time.

Sandtree

ecw19 said:

bris said:

It's likely they would see through it. If they are linked, as in you can't have one without the other then you would struggle to claim two seperate items.

In fact lets take a suit as an example, if you have a jacket at £60 and a pair of trousers priced at £40 then S75 doesn't apply, but if they are linked by calling it a suit the the £100 total is covered.

In your case the opposite is true, if you can't have one without the other then its not two seperate items.

So a bit more information is required.

Thanks everyone for your responses! The projects can be split into building work and landscaping / laying decking, each could be done without the other but for convenience we're having the same company doing both at the same time. Hope that helps clarify!

Will the work actually be done concurrently or consecutively? Clearly life is easier to defend if you have one job done on one contract and then sign the second contract for the second job to be done after being so impressed with the first... plus this mitigates the risk of the company doing a runner with the deposit from both projects.