Adding VAT to a quotation retrospectively

KaOs74

We accepted a quote for a bathroom refurb some 7 months ago.  The work has been delayed for several reasons but is due to commence next month.  We’ve just been told that VAT now has to be added to the quote as the tradesperson has reached the £85k limit and now needs to register with HMRC for VAT.  Do we have to pay this or only what was originally quoted (quote states ‘no VAT to be added’).  Thanks

diystarter7

KaOs74 said:

We accepted a quote for a bathroom refurb some 7 months ago.  The work has been delayed for several reasons but is due to commence next month.  We’ve just been told that VAT now has to be added to the quote as the tradesperson has reached the £85k limit and now needs to register with HMRC for VAT.  Do we have to pay this or only what was originally quoted (quote states ‘no VAT to be added’).  Thanks

Hi
You can either ask the builder to adjust the quote to inc the vat at the original amount or not go ahead.

NB: However, it all depends on what the contract T&C's stated so read and act accordingly.

My guess is, if you were in London, builders, good and rubbish ones have so much work they just wont go ahead with it and then its up to you to do what you want as per T&C of the contract.

Thnaks

Grumpy_chap

KaOs74 said:

We accepted a quote for a bathroom refurb some 7 months ago.  The work has been delayed for several reasons but is due to commence next month.  We’ve just been told that VAT now has to be added to the quote as the tradesperson has reached the £85k limit and now needs to register with HMRC for VAT.  Do we have to pay this or only what was originally quoted (quote states ‘no VAT to be added’).  Thanks

This seems a complex situation.

If there has been a 7-month wait, this tradesperson is obviously busy and will potentially tolerate losing your order if you push back too hard.

It is also true that once the threshold is exceeded (or approaching) the tradesperson has no option other than to register for VAT.

There might be some scope to discuss the amount of "hit" that you need to suffer. 
In part, the tradesperson may be willing to "share" the pain, as this is definitely not your fault as the customer.
But, actually, some sharing is also potentially correct.  You have not given figures, but say the original quote was £10k.  
Has the tradesperson added 20% (£2k) to the full £10k?
At first glance, that would seem correct.
However, if the original quote was £6k for the materials and fittings to be installed plus £4k for the labour, then that £6k already includes £1k VAT - it will now be £5k cost plus £1k input VAT to the tradesperson.  The sales price is then £5k materials plus £4k labour = £9k plus VAT = £10.8k. 
The "pain" to be borne by someone is no longer £2k, but is the £800.  That becomes a more tolerable difference to either fall to one party or to be shared.
The difficulty in this explanation may be that the tradesperson is not fully aware of the way VAT works and the way this impact from the input VAT lessens the overall uplift.

How does the cost quoted (with and without the VAT change) compare to other suppliers in the area?
If the OP pushes back too hard, or decides not to go ahead with this tradesperson, an alternative provider may well be just as expensive plus the OP has another 7-month wait.

Also, is the true reason behind the uplift in cost over the 7 months all down to the VAT registration?  Has there been movement in costs that has to be met in any case, and the change of VAT status is being used, in part, as cover for that uplift?

KaOs74

Thank you for the helpful responses.  There are very few T&Cs only that waste removal isn’t included and their work is guaranteed for 12 months.  Our situation is further complicated as the bathroom fitter was hired, on recommendation of our bathroom supplier, to do two bathrooms.  Both should have been completed before Christmas.  One was but took 29 working days despite no major problems being encountered.  The knock on effect of that was to push this next room into this year and, as we learnt this week, into his VAT bracket!  The previous work wasn’t without problems but these were mostly generated by him ‘flitting’ between jobs and forgetting or rushing things with us.  There is still some ‘snagging’ to redress in the bathroom he’s done.  It’s a nightmare but I’m very grateful for your explanations and advice.  Thanks again for taking the time to post.

Grumpy_chap

What is the total value of the work for the two new bathrooms?
What is the extra that has been requested for the VAT?

Strictly speaking, the tradesperson should have registered for VAT as soon as they became aware they would exceed the threshold.  Arguably, that was once they had order book showing the threshold would be exceeded and, had they registered then, the first bathroom before Christmas may also have been liable.

I understand the sour taste, but pragmatic consideration may be that the charge is worth paying.

KaOs74

Grateful for your post.  Does it make a difference if our fitter is subcontracting to others such as an electrician and a plumber as their costs are detailed as part of the quote which he is now requested us to pay VAT on?  When he did the first bathroom he asked us to pay the lad working with him a four figure sum directly.  He (the lad) definitely won't be registered for VAT and we doubt the electrician and plasterer will be VAT registered.  Could we legally pay them all directly thereby limiting the VAT?

The additional VAT amount he wants to apply to the, yet to be done, second bathroom (an en suite) is just under £1000.  We've just met an additional cost of around £800 for a pump and the work to fit as despite asking at the planning stage neither the bathroom planner nor our fitter saw fit to say one would be required.  This project began just before Covid and we shelved it as we're pensioners and thought it sensible not to have workmen in the house.  The plus side was we were able to save some money throughout Covid and up our budget.  We've bought quality fixtures and fittings and by going through a reputable dealer and with their recommended plumber we rather hoped we'd minimised any risk of faulty products or poor workmanship.  We were wrong!  Thanks again, your answers are much appreciated.

DullGreyGuy

KaOs74 said:

Grateful for your post.  Does it make a difference if our fitter is subcontracting to others such as an electrician and a plumber as their costs are detailed as part of the quote which he is now requested us to pay VAT on?  When he did the first bathroom he asked us to pay the lad working with him a four figure sum directly.  He (the lad) definitely won't be registered for VAT and we doubt the electrician and plasterer will be VAT registered.  Could we legally pay them all directly thereby limiting the VAT?

It's not uncommon for companies to get you to hire the subs directly (or buy materials) as this then avoids it being revenue on their book and means they can do more work before hitting the threshold for registration.

Be aware of the consequences of this though... if the sparky does something wrong you main contractor can legitimately wash their hands of it as you've contracted directly. This can lead to finger pointing if its unclear which of the trades messed up whereas with one contract with one contractor all of those headaches are theirs to fix.

KaOs74

Thank you for all your comments.  Here’s an update and what, I hope, will be a final question.  The bathroom fitter has chosen to walk away from our second job.  We accepted his quotes way back last June and work should have commenced mid October with both rooms being refurbished consecutively.  He completed one room in early December.  Due to his other work commitments the one remaining room got pushed back to this February.  There are still ongoing snags to be sorted with the completed bathroom.  We balked at being asked to pay VAT on this second room but didn’t say we wouldn’t or that we wouldn’t meet in the middle but he’s chosen to walk away.  My question is, is he in breach of contract by doing this?  We felt we would have been if it had been us that had stated we didn’t want him back.  We now have a fully planned bathroom with our supplier storing all the new bathroom furniture and fittings and no fitter.  We know finding a good fitter will be difficult (it is why we went with a recommendation from the supplier and waited months for him) and that it is likely to be months before anyone worth having is available.  We couldn’t be more disappointed with the situation we find ourselves in.  Once more, grateful for your input and for taking the time with me questions.  

Jeremy535897

It may well be that he is in breach of contract, but using that to get him to change his mind and doing the work willingly to a high standard for the quote is unrealistic. It is unlikely that a court would oblige him to do do the work (specific performance), and if one did, do you really want someone doing the job who has been forced to do it? You are more likely to get some modest compensation, but will still have a bathroom that is not fitted, and a fitter who will have told all his contacts in the trade not to work for you under any circumstances. You will have to decide whether to try to get the fitter back on  board, or find another fitter.