Wrongly charged VAT

DullGreyGuy

tightauldgit said:

p1583m said:

1. My understand is The VAT helpline only helps you validate a Vat number. they wouldn’t give me one. The chap I spoke to didn’t really seem to know what he was talking about. 

2. I only have one invoice from him. He never provided me with one and was normally unwilling to. The only other document is a quote with the £7500 VAT breakdown but it’s not an invoice. He never receipted me for any payments I made to him. Which probably goes to show how bad his paperwork is. My wonder is, because he never invoiced or receipted and I always paid in good faith, whether the court would rule in my favour. I think they might because he’s been misleading and dare I say it fraudulent. 

3. Yes if he is earning over the threshold he should be VAT registered. I know there is a website to report it. 

1. What did you actually ask the guy on the HMRC line? I suspect the correct thing to do would be to explain you have been charged VAT by someone who you believe is not VAT registered. At the end of the day its up to the trader to prove they are registered not you to find it out. If they haven't given you a VAT number then you should assume they aren't registered

2. Again, a court should rule in your favour either way. Either he's fraudulently charged you VAT or you've overpaid due to an error. If the original quote showed VAT in error then you should be refunded any that you paid. And he should still report himself to HMRC and get fined a minimum of 10% of the total amount

3. Then report it.  

Presumably if they report them to HMRC and HMRC decide they should have been VAT registered then they will have to pay the VAT they should have plus a fine.

How does this work in practice? Lets say for simplicity they had billed the OP £10,000 + £2,000 VAT. Do HMRC get the £2,000 (plus fine) as the invoice stated or do they say that the customer paid £12,000 and so they should pay £2,400 in VAT + the fine?

If it turns out the trader wasnt VAT registered but HMRC does retrospectively register them and fine them then does the OP have any case at all as whilst at the point in time it was wrong it is now correct 

tightauldgit

DullGreyGuy said:

tightauldgit said:

p1583m said:

1. My understand is The VAT helpline only helps you validate a Vat number. they wouldn’t give me one. The chap I spoke to didn’t really seem to know what he was talking about. 

2. I only have one invoice from him. He never provided me with one and was normally unwilling to. The only other document is a quote with the £7500 VAT breakdown but it’s not an invoice. He never receipted me for any payments I made to him. Which probably goes to show how bad his paperwork is. My wonder is, because he never invoiced or receipted and I always paid in good faith, whether the court would rule in my favour. I think they might because he’s been misleading and dare I say it fraudulent. 

3. Yes if he is earning over the threshold he should be VAT registered. I know there is a website to report it. 

1. What did you actually ask the guy on the HMRC line? I suspect the correct thing to do would be to explain you have been charged VAT by someone who you believe is not VAT registered. At the end of the day its up to the trader to prove they are registered not you to find it out. If they haven't given you a VAT number then you should assume they aren't registered

2. Again, a court should rule in your favour either way. Either he's fraudulently charged you VAT or you've overpaid due to an error. If the original quote showed VAT in error then you should be refunded any that you paid. And he should still report himself to HMRC and get fined a minimum of 10% of the total amount

3. Then report it.  

Presumably if they report them to HMRC and HMRC decide they should have been VAT registered then they will have to pay the VAT they should have plus a fine.

How does this work in practice? Lets say for simplicity they had billed the OP £10,000 + £2,000 VAT. Do HMRC get the £2,000 (plus fine) as the invoice stated or do they say that the customer paid £12,000 and so they should pay £2,400 in VAT + the fine?

If it turns out the trader wasnt VAT registered but HMRC does retrospectively register them and fine them then does the OP have any case at all as whilst at the point in time it was wrong it is now correct 

My understanding would be that you would report the income as VATable income and then the VAT due on that would be calculated as if you had been VAT registered at the time (so 10k + £2k VAT) but I could be wrong. 

As to whether OP could still get his VAT back I'm really not sure - I think you could certainly make a case that as he was not VAT registered at the time then he had no right to charge VAT and it should be refunded and I suspect that would be the law. It would seem unfair to OP if he was somehow made to pay the VAT while other customers didn't.   

Either way I suspect it wasn't a clever move by this builder to charge VAT

Grumpy_chap

p1583m said:

Hi All, I had a builder extend my home. Works ‘completed’ March 2022. Ongoing issues since but irrelevant to this post. 

His original quote some 12 months before showed a net vat breakdown then vat at 20% totalling £7500. Works were just under £45k incl VAT. There was no VAT number on his documents at that time. 

I’ve since communicated with a competitor of his and at least one other homeowner who has used him and my understanding is he isn’t VAT registered and hasn’t charged other customers VAT. He was carrying out 2 or 3 other extensions in our village at the same time with at least the same value so I just assumed he was VAT registered. 

He has only ever invoiced me once. This was for supply of a kitchen which included VAT but that VAT was to the kitchen company. He didn’t charge any overhead or VAT on the kitchen quote. There was no VAT number on that invoice despite VAT being shown for the kitchen supply.  

All other stage payments I’ve paid in good faith in the hope it would keep him going on my project and that he would do a good job. How wrong I was!

It seems I’ve paid him around £5k of the £7500 he originally claimed was for VAT. 

I had previously asked for his VAT number but he did not reply. I’ve asked again and awaiting a reply. 

Has anyone had any similar issues? I understand that it’s a dispute between us and the HMRC not interested at this stage and didn’t provide much advice. There is also no function to establish his VAT number. You can only check a number is valid if you have one. 

I’ve said that if there is no VAT he should provide me with a refund. 

What are my options if he doesn’t? Is it worth making a claim for money? 

Is your concern here about the possible VAT-fraud? 
Very noble to be concerned for the finances of the Exchequer

Is the concern here that you think you over-paid by the £7.5k of VAT? 
It may not be the case.  As a consumer, the price you pay is market-related so using a small contractor that is not VAT-registered will quite likely price the job similar to a larger contractor that is VAT-registered.  Also, it is only the labour undertaken directly by the builder that would not incur VAT as the material and sub-contract supplies would incur VAT that passes on either way (although the details of the mechanism are different).

Is the concern here that you feel the work done was substandard?
A long post about VAT, but a couple of lines referencing a good job (or otherwise).

bris

Are you sure he wasn't just recovering the VAT he had to pay out to the suppliers?

tightauldgit

bris said:

Are you sure he wasn't just recovering the VAT he had to pay out to the suppliers?

You aren't allowed to 'recover the VAT' if you aren't VAT registered though. If you aren't VAT registered your paperwork shouldn't have any mention of VAT anywhere on it. 

And I know what you mean - they're just charging the VAT they had to pay - and that's fair enough they can obviously price the work however they choose but it shouldn't be shown as a charge for VAT anywhere. 

I don't really know why any trader would charge (or claim to charge) VAT when they don't have to - they can simply price the work as they choose. Maybe they thought it was a justification for an inflated price? Or, the only semi-sensible reason I can think of is that they registered for VAT and wrongly started adding it to their invoices before they actually got their VAT number.

In any case if OP has paid VAT to a non-registered business then they are due a refund and business is due a penalty of at least 10% of the amount  

DullGreyGuy

tightauldgit said:
I don't really know why any trader would charge (or claim to charge) VAT when they don't have to - they can simply price the work as they choose. Maybe they thought it was a justification for an inflated price? Or, the only semi-sensible reason I can think of is that they registered for VAT and wrongly started adding it to their invoices before they actually got their VAT number

Its a £45k job the OP had done and so most companies working on that size of project will be VAT registered, assuming the OP wanted someone experienced in large projects rather than taking a punt on a guy that does smaller projects normally. As such all those bidding against this builder will be adding VAT 

As he appears to be pocketing the VAT he can undercut his competitors because the VAT is going into his pocket but still have the excuse that its the taxman that's to blame for it being so high... people can be funny as a non-VAT registered he could charge £42,000, it would save his customer £3k and put an extra £4,500 in his pocket over the VAT registered person but punters will argue that if the others can do it for £37,500 + VAT that he is expensive at £42k despite it saving them monies

bris

tightauldgit said:

bris said:

Are you sure he wasn't just recovering the VAT he had to pay out to the suppliers?

You aren't allowed to 'recover the VAT' if you aren't VAT registered though. If you aren't VAT registered your paperwork shouldn't have any mention of VAT anywhere on it. 

Of course you are, as a sole trader you recover the invoice amount, that's the total, you don't write off the VAT part of it.

What you don't do is correct though you don't put VAT any where on the invoice.

My invoices are simple, parts, Labour, two separate lines then Total

the_lunatic_is_in_my_head

bris said:

tightauldgit said:

bris said:

Are you sure he wasn't just recovering the VAT he had to pay out to the suppliers?

You aren't allowed to 'recover the VAT' if you aren't VAT registered though. If you aren't VAT registered your paperwork shouldn't have any mention of VAT anywhere on it. 

Of course you are, as a sole trader you recover the invoice amount, that's the total, you don't write off the VAT part of it.

What you don't do is correct though you don't put VAT any where on the invoice.

My invoices are simple, parts, Labour, two separate lines then Total

Language problem again.

VAT registered businesses record inputs and outputs and then pay/receive the difference to/from HMRC, this could be referred to as "recovering the VAT".

You meant if a non-VAT trader pays £100 + £20 VAT to a supplier they'll obviously charge their customer the £120 (plus any mark up), this could also be referred to as "recovering the VAT".  

tightauldgit

bris said:

tightauldgit said:

bris said:

Are you sure he wasn't just recovering the VAT he had to pay out to the suppliers?

You aren't allowed to 'recover the VAT' if you aren't VAT registered though. If you aren't VAT registered your paperwork shouldn't have any mention of VAT anywhere on it. 

Of course you are, as a sole trader you recover the invoice amount, that's the total, you don't write off the VAT part of it.

What you don't do is correct though you don't put VAT any where on the invoice.

My invoices are simple, parts, Labour, two separate lines then Total

No, as I said, you can charge whatever you need to cover your costs (including any VAT you need to pay on what you buy) but you are not 'recovering the VAT' (i.e. passing VAT on to the end customer) because that wouldn't be allowed if you aren't VAT registered. 

It's a semantic point in terms of the total number that the customer sees on the invoice but it's also important because if your invoice says VAT on it and you aren't VAT registered then you are in for a fine from HMRC.