Builder didn't include VAT on Invoice

the_lunatic_is_in_my_head

Exodi said:

DullGreyGuy said:

LondonPepper said:

DullGreyGuy said:

How much was the original quote? Was it clear if that was inclusive or exclusive of VAT?
How much was the invoice for?

If you had a quote for £500 + VAT or £600 inc VAT but only were sent an invoice for £500 with no reference to VAT then the merchant would still be well within the 6 years of the statute of limitations to make the claim for the shortfall.

If they said it was £500 all in and you paid an invoice for £500 then they can go whistle. 

total quote was with no mention of VAT, just the figure and same with the invoice 

To the best of my knowledge all pricing presented to consumers should include VAT by default or at a minimum make it abundantly clear that VAT is to be added. 

If they were moot on VAT then what they quoted was an all in price be that all in with no vat because they arent vat registered or all in inclusive of VAT because they are VAT registered. 

Yes you're right:

Value Added Tax

(i) Price indications to consumers

2.2.7.  All price indications you give to private consumers, by whatever means, should include VAT.

(ii) Price indications to business customers

2.2.8.  Prices may be indicated exclusive of VAT at an outlet or through advertisements from which most of your business is with business customers. If you also conduct business at that outlet or through these advertisements with consumers, however, you should make it clear that the prices exclude VAT and you should—

(a)display VAT inclusive prices with equal prominence; or

(b)display prominent statements that the quoted prices exclude VAT and state the appropriate rate. It should be noted that VAT inclusive prices for all goods offered by traders to consumers are required by the Price Marking Order 2004(8) (further information can be obtained from your local Trading Standards Service).

https://www.legislation.gov.uk/uksi/2005/2705/made?view=plain

Generally all prices provided to consumers (as opposed to businesses) should include VAT. In fact, by chance, the gov.uk page actually specifically cites builders in their example:

Invoices from suppliers like builders, painters and decorators must show a separate amount for VAT and their VAT registration number.

https://www.gov.uk/tax-on-shopping/where-you-see-vat

I think we have been given half the story though, and I think born_again clocked on to it also.

It's a tad coincidental that the OP notices a fault with a builders work and then independently the builder notices they forgot to charge VAT.

Could we hazard a guess that the OP and the first builder had a conversation before this, and that this was their response?

Builders dodging VAT obligations is as old as the hills. Though I am surprised they're the ones drawing attention to it, considering they are the ones obligated to collect and pay the correct tax. The OP might be minded to let HMRC know that this builder has seemingly 'forgot' to pay VAT on their past jobs - you have at least one example.

It is not a consumers responsibility to ensure VAT is being paid out of the price - unless the builder reasonably believed the OP was a business, and even then they should have stated the price was ex VAT.

I've seen that order before but section 25(1) of the Consumer Protection Act 1987 (mentioned at the top of the order) has been removed and replaced by the Consumer Protection from Unfair Trading Regulations so I'm not sure if the order is still valid (that's not to say it isn't rather I have no idea). 

LondonPepper

Thanks for the detailed response.

I had invited the roofer in question back after noticing a leak in the roof where they had done the work expecting them to say they would check it out and repair the problem as they said all work was guaranteed for a year. Instead they quoted a larger sum to fix the 'new issue'.  This is when I got another roofer to quote and whilst he was up there he noticed the bad work done by the original roofer. 

Since then I have not had any communication with the original roofer until this new message asking for 20% extra to be paid. 

tightauldgit

LondonPepper said:

Roofer did some work which turned out be to be bad in the end and had to be fixed by another roofer. But invoice was paid at the time as we aren't experts and from what he showed us it looked ok. There was no mention of VAT on the invoice just a total for the work, no vat number. A year later he is now messaging asking for the 20% VAT to be paid on that invoice. What can/should we do?

Tell him to go away in short sharp jerky movements. 

If he's due to pay VAT then it's his responsibility but if he didn't quote for it at the time and didn't show a VAT number then he's got no comeback. He probably wasn't even VAT registered (may still not be for all we know) and is just chancing his arm. 

Jonboy_1984

Sometimes if sole traders or companies should have been VAT registered due to exceeding the threshold but are not then HMRC backdate the registration date. 

Accountants then advise to try and get the VAT from customers retrospectively, so they don’t end up out of pocket, often whilst helping them unpick the rest of the issues that arise. 

If the customer is a VAT registered (non-flat rate scheme company if nit picking) business it doesn’t make much odds as you time it to pay it over, and claim it straight back off the next VAT return.

As an individual or non-VAT registered company I would tell them where to go…

tightauldgit

Jonboy_1984 said:

Sometimes if sole traders or companies should have been VAT registered due to exceeding the threshold but are not then HMRC backdate the registration date. 

Accountants then advise to try and get the VAT from customers retrospectively, so they don’t end up out of pocket, often whilst helping them unpick the rest of the issues that arise. 

If the customer is a VAT registered (non-flat rate scheme company if nit picking) business it doesn’t make much odds as you time it to pay it over, and claim it straight back off the next VAT return.

As an individual or non-VAT registered company I would tell them where to go…

Rather than 'backdating the registration date' is it more accurate to say the trader is 'told to pay the VAT they should have paid back to the date they should have registered' - but that obligation doesn't pass anything on to the customer. A trader can't backdate a VAT bill. 

Of course anyone can ASK for anything from anyone but you'd have to be a bit silly to agree to pay anything to someone who suddenly claims they 'forgot' to charge you VAT. 

outtatune

Jonboy_1984 said:

Sometimes if sole traders or companies should have been VAT registered due to exceeding the threshold but are not then HMRC backdate the registration date. 

Accountants then advise to try and get the VAT from customers retrospectively, so they don’t end up out of pocket, often whilst helping them unpick the rest of the issues that arise. 

That's not how VAT works. VAT is a tax that the supplier pays, not the customer. Asking the customer to pay extra after the fact because they didn't correctly account for VAT is no different to asking the customer to pay extra after the fact because they forgot to take into account their vehicle costs when deciding what would be a fair price to charge.

Exodi

outtatune said:

Jonboy_1984 said:

Sometimes if sole traders or companies should have been VAT registered due to exceeding the threshold but are not then HMRC backdate the registration date. 

Accountants then advise to try and get the VAT from customers retrospectively, so they don’t end up out of pocket, often whilst helping them unpick the rest of the issues that arise. 

That's not how VAT works. VAT is a tax that the supplier pays, not the customer. Asking the customer to pay extra after the fact because they didn't correctly account for VAT is no different to asking the customer to pay extra after the fact because they forgot to take into account their vehicle costs when deciding what would be a fair price to charge.

I'm going to disagree with your disagreement.

VAT is a consumption tax that is borne by the consumer, it is not a charge on businesses. It is a red herring that businesses are obligated to collect it on behalf of consumers, but the alternative (having a customer pay £1 for a loaf of bread, and then separately have the customer transfer 20p to HMRC) isn't very practical.

It is entirely separate to operating costs or margin. Businesses do not need to factor in VAT to their operating margins, which is evident by the fact that all business financials, budgets, etc are net (ex VAT). They are just collecting it and passing it on.

In this case though, obviously if a business 'forgets' to collect it, they'll have difficulties when they need to pass it on.

But most businesses (except seemingly a lot of self employed tradespeople) collect VAT without issue in an accrual account.

Grumpy_chap

There was a recent thread where a tradesperson failed to include VAT in the quote but then added later.  It may be worth the OP reviewing in case of any pertinent comments:
https://forums.moneysavingexpert.com/discussion/6446003/wrongly-charged-vat/p1

WinterDragon

Jonboy_1984 said:

Sometimes if sole traders or companies should have been VAT registered due to exceeding the threshold but are not then HMRC backdate the registration date. 

Accountants then advise to try and get the VAT from customers retrospectively, so they don’t end up out of pocket, often whilst helping them unpick the rest of the issues that arise. 

If the customer is a VAT registered (non-flat rate scheme company if nit picking) business it doesn’t make much odds as you time it to pay it over, and claim it straight back off the next VAT return.

As an individual or non-VAT registered company I would tell them where to go…

This is what I suspect has happened that the builder has been caught over the registration threshold and HMRC have backdated the registration date. 

This is a classic question from my indirect taxes module from way back of when a business is caught over the threshold and has to register they can either suffer the consequences and pay out of pocket or kindly ask their customers to pay the VAT that should have been charged. 

Sounds like it's the builder's fault for not registering on time so he should pay for his own mistake.