Having an extension built, potential red flags?

newparent77

We are currently having an extension built on our house. Work started a few days ago and the digging is almost completed ready for an inspection before the foundations work begins. However, a couple of things have happened which are ringing slight alarm bells (I hope without need) and just wanted to run them by people. The builder has been recommended by a couple of different people locally and in general has been helpful so far.

1) The builder (a project manager who is then using other contractors to do most of the work) included in his quote the cost of the groundworks. The builder is VAT registered so the quote included VAT. He has, however, suggested just paying the groundworker direct in cash without the VAT (he says the groundworker isn't VAT registered). The builder will then take the amount owed to the groundworker off the quote, including the extra VAT. This effectively saves us money over the original quote, but is it all above board?

2) Part of the work involves building a retaining wall to hold back the existing lawn (which is higher than a new patio which will be created as part of the work). The subcontracting bricklayer came to visit the site, captured the requirements and fed that back to the project managing builder, who provided a final quote. However, it transpires this quote didn't include the wall as it got missed (and to be fair, I didn't catch that either, I assumed it was bundled in with other related 'landscaping' work). They were saying earlier they will need to add this on to the quote and it could be up to £2,000 including labour and materials. Again, he has suggested paying the bricklayer direct for this part (also non-VAT registered) to save some money.

I'm irritated it was missed off the original quote, but also annoyed at myself for missing it. We can afford to cover the extra, but what would you do? Just pay up and accept things happen and costs can increase? Or kick up more of a fuss?

Hope any of that makes sense! First time with a building project of this size so interested in any opinions...

FaceHead

On 1. Well, it is dodgy isn't it. To be asking, you must already know this. The need for the groundwork to be paid in cash (and not merely directly, say by bank transfer) demonstrates that they might need to be VAT registered if all their work was above board, and/or that they will be avoiding income tax/claiming benefits they would otherwise not be entitled to. Now hopefully you see what's in it for them, and it's not a completely altruistic offer to save you money. So it's dodgy helping them evade taxes. Your choice whether you want to facilitate their wrongdoing, or pay the extra VAT. It is quite common for householders to pay the trades in cash in this situation. 

Question 2 is much harder. Had you clearly communicated that you wanted the wall built, so that your assumption that it was inside 'landscaping' was justified? How could it possibly not have been if they are building the patio? Was the quote itemised in a way that could have allowed you to catch this? If the builder has mis-quoted and is now saying things aren't included, they can't be just chucking them back on. Whereas if you've not asked for it, then clearly it's extra. The overall price of the job is important too - if it's a very reasonably priced job you can't reasonably ask them to take it out of their margin. 

I certainly think you need to offer something at this point to keep the relationship in tact. If the whole amount, you need to give them a few stern words to make sure they don't start taking you for a ride. Depending on the circumstances, perhaps there's some room for negotiation.

TELLIT01

Paying subcontractors directly isn't necessarily a problem as it does save the main contractor the effort of passing money on, and the subbie gets paid faster.  I would still want an invoice and receipt from the subbie for any payment made direct to them.

newparent77

FaceHead said:

Question 2 is much harder. Had you clearly communicated that you wanted the wall built, so that your assumption that it was inside 'landscaping' was justified? How could it possibly not have been if they are building the patio? Was the quote itemised in a way that could have allowed you to catch this? If the builder has mis-quoted and is now saying things aren't included, they can't be just chucking them back on. Whereas if you've not asked for it, then clearly it's extra. The overall price of the job is important too - if it's a very reasonably priced job you can't reasonably ask them to take it out of their margin. 

I certainly think you need to offer something at this point to keep the relationship in tact. If the whole amount, you need to give them a few stern words to make sure they don't start taking you for a ride. Depending on the circumstances, perhaps there's some room for negotiation.

Thank you for this. On the cash in hand thing, I'm sure they might say this anyway but they said it was more of a speed of payment/it's a contractor who does the work on a very small scale rather than as a full time job, rather than a VAT dodge. But of course, that could all be false!

On the above, it was clearly communicated that the wall was required, but also I can see now it isn't explicitly mentioned in the itemised quote. I'll see what price comes through and then see if there's a bit of wriggle room somewhere. 

newparent77

TELLIT01 said:

Paying subcontractors directly isn't necessarily a problem as it does save the main contractor the effort of passing money on, and the subbie gets paid faster.  I would still want an invoice and receipt from the subbie for any payment made direct to them.

Thank you, and yes, the speed and ease of payment seemed to be the main thing. The main contractor said he would happily take the payment from us, but he would obviously be charging us the VAT and then probably just paying the sub-contractor in cash anyway. But yes, will certainly be asking for a receipt.

NeverTooLate

I wouldn't have a problem paying the subbie direct without vat as long as they are genuinely not vat registered, but I would question who would be guaranteeing these parts of the work.

newparent77

NeverTooLate said:

I wouldn't have a problem paying the subbie direct without vat as long as they are genuinely not vat registered, but I would question who would be guaranteeing these parts of the work.

Thank you, and yes, the work would still be guaranteed by the main contractor as part of the job as a whole.