Roofer Invoice Charging VAT but No VAT Number

grumbler

MapleTrees said:

...

I wonder how common this is.

It's far more common than you can imagine. Many VAT-registered traders routinely quote price without VAT (without clearly stating this) to private customers to make the price look more attractive. They know that when they add VAT in the invoice later most customers won't challenge this.

A few years ago I got a quote for a new bathroom with VAT set out on the quote, but the trader wasn't actually VAT registered. That was quite worrying because he was a fairly high end business.

In fact, it's not a private customer's business whether the trader is VAT-registerd or not. What matters for them is only the total price -  like in Tesco. Only for VAT-registered customers this makes difference because they can claim VAT they pay.

Eldi_Dos

I am sure the scaffolder is not the only one wondering why you felt the need to send " legal statement" at this stage.

MapleTrees

Eldi_Dos said:

I am sure the scaffolder is not the only one wondering why you felt the need to send " legal statement" at this stage.

So you're aware, this was the reply (the scaffolder had emailed me saying he was adding VAT to all his old quotes):

"Thanks for the response.

To clarify, you have not added VAT to an old quote - you have added it to the invoice.

You registered for VAT and at that point you had agreed quotations already in place from the period just before registration. You have two choices at this stage, to honour the agreed quotations or to gain agreement from those customers for the additional charge.

You can only add VAT to an existing quote if you cancel that quote and (before work commences) raise another with the new VAT element clearly set out. The customer can then either agree or reject the new quote according to their budget. Unfortunately we weren’t given that option and we received an invoice substantially higher than the sum agreed.

The relevant legislation is this one:  According to the Consumer Protection from Unfair Trading Regulations 2008, a tradesperson is not acting within the law if they add VAT in an invoice if it wasn’t also clear in the quote. To do so is a misleading omission 1.

If your accountant has told you to ignore this then you need to find a new accountant!

Regards,

xxxxx"

I was of the mind that he may not be aware of the rules, hence mentioning the legislation. His response suggested he didn't understand why I'd raised the discrepancy. My profession is one where I'm bound by quite a lot of similar rules so quoting them would not be seen as unusual. I don't think I'm saying anything remotely threatening or unpleasant in my reply to him.

When he replied he said all his customers were fine about the increase being added retrospectively. He was unhappy I queried it and suggested I was an exception. It's not something I would even think of doing in my profession so there's no double standard here.

MapleTrees

grumbler said:

MapleTrees said:

...

I wonder how common this is.

It's far more common than you can imagine. Many VAT-registered traders routinely quote price without VAT (without clearly stating this) to private customers to make the price look more attractive. They know that when they add VAT in the invoice later most customers won't challenge this.

A few years ago I got a quote for a new bathroom with VAT set out on the quote, but the trader wasn't actually VAT registered. That was quite worrying because he was a fairly high end business.

In fact, it's not a private customer's business whether the trader is VAT-registerd or not. What matters for them is only the total price -  like in Tesco. Only for VAT-registered customers this makes difference because they can claim VAT they pay.

I think that if a trader was VAT registered and intended to charge VAT on the invoice, the quote would have to state that VAT was either included or excluded - or at least have a set of covering terms saying the same. If there was no mention of VAT anywhere then you could assume there was none (when I've queried it in the past that has been the case).

As a private customer I would want to know if the trader was VAT registered if they were including VAT on the quote. 

Section62

MapleTrees said:

Section62 said:

MapleTrees said:

Should I even respond to this?  Or I could politely point out the rules - in case he genuinely doesn't know that it's illegal to invoice for VAT without raising a new quote first for the client to agree?

I have my doubts it is "illegal" to do what the trader has done.  The relevant legislation is designed to deal with traders who deliberately set out to con customers.  It doesn't make any provision for situations where there is a change of circumstances, for example becoming VAT registered.

The trader has done wrong in not communicating to you that he would now have to add VAT to the previously quoted price, but has corrected that by (apparently) taking the loss himself.

The legislation states that a trader is not acting within the law if they add VAT to an invoice when it was not set out on the quotation. So surely it is illegal, as I read that. 

To be clear - there is no prospect I would shop the trader!

A change of circumstances is surely immaterial - there was ample opportunity to communicate that before the work commenced but the trader chose not to.

You say that he is bearing the loss himself, as if I'm unreasonably imposing that on him. In fact he attempted to pass on his new liability to me in a way which removed my right to refuse. He has only corrected that because I have pointed it out to him - again, not unreasonably. 

I've run a small business and if I issued a quote, did the work, and then sent an invoice for substantially more because my suppliers had raised their prices in the interim (which they often did) I think my customers would have thrown the book at me. With an 'estimate' it would have been easier to deal with.

Which legislation states the BiB?

The Consumer Protection from Unfair Trading Regulations 2008 you've quoted to the trader doesn't state anything like that.

The legal opinion linked to earlier in the thread suggests not including VAT in a quote but subsequently adding it could be a misleading omission (Regulation 6) but whether it is or isn't depends on interpretation of the facts of the case.

At the time the trader produced the quote he wasn't VAT registered, so not only did he not need to include VAT, it would have been unlawful for him to have done so.  He couldn't be prosecuted for a misleading omission for not including VAT in the quote.

The question is whether him not informing you that he had become VAT registered and would have to add VAT to the invoice is a misleading omission for the purposes of the legislation.  As I indicated above, I don't think this is a clear cut 'yes'. It will depend on the timing, and exactly who said what when.

The trader hasn't "removed [your] right to refuse".  You refused, he agreed to amend the invoice.  What he did in terms of adding VAT to the invoice is entirely in accordance with his legal obligation to do so.  What he should have done was to tell you about it before starting work, which would have allowed you to compare his new price with the other quotes you had - but he was also under no obligation to go ahead with the work at the original price if you refused to pay the VAT.

This isn't the same as you increasing your prices because your suppliers were charging more.  VAT is a tax which you - as the end customer - are obliged to pay.  The VAT liability came about because the trader's circumstances changed, just as the VAT liability would change if the government increased (or decreased) the VAT rate between quotation and invoicing.

It is an unfortunate situation, which the trader has agreed to resolve to your satisfaction.  But I can understand why they are less than happy at being accused of doing something illegal.

grumbler

MapleTrees said:

grumbler said:

MapleTrees said:

...

I wonder how common this is.

It's far more common than you can imagine. Many VAT-registered traders routinely quote price without VAT (without clearly stating this) to private customers to make the price look more attractive. They know that when they add VAT in the invoice later most customers won't challenge this.

A few years ago I got a quote for a new bathroom with VAT set out on the quote, but the trader wasn't actually VAT registered. That was quite worrying because he was a fairly high end business.

In fact, it's not a private customer's business whether the trader is VAT-registerd or not. What matters for them is only the total price -  like in Tesco. Only for VAT-registered customers this makes difference because they can claim VAT they pay.

I think that if a trader was VAT registered and intended to charge VAT on the invoice, the quote would have to state that VAT was either included or excluded - or at least have a set of covering terms saying the same.

Yes - if it's a formal written quote - that's usually not the case for small jobs.

As a private customer I would want to know if the trader was VAT registered if they were including VAT on the quote.

As a private customer the only you want to know is the total price and you don't care about his VAT status. For you quote is the price you pay.  Like price tags in Tesco - some prices include VAT, some don't (0% VAT) - do you care? Only VAT-registered customers want to know prices net of VAT because that's the actual cost for them.

The quote can be without VAT, no problem, but it has to clearly say this, say, £100 plus VAT 20%. Otherwise, it presumably includes VAT.

MapleTrees

Section62 said:

The question is whether him not informing you that he had become VAT registered and would have to add VAT to the invoice is a misleading omission for the purposes of the legislation.  As I indicated above, I don't think this is a clear cut 'yes'. It will depend on the timing, and exactly who said what when.

What he should have done was to tell you about it before starting work, which would have allowed you to compare his new price with the other quotes you had - but he was also under no obligation to go ahead with the work at the original price if you refused to pay the VAT.

The VAT liability came about because the trader's circumstances changed, just as the VAT liability would change if the government increased (or decreased) the VAT rate between quotation and invoicing.

It is an unfortunate situation, which the trader has agreed to resolve to your satisfaction.  But I can understand why they are less than happy at being accused of doing something illegal.

I'm struggling to see how the situation is not clear-cut. I have set out the communication trail. The trader quoted several weeks ago and we accepted the quote which was expressly ex VAT. After invoicing us post-work I queried the higher price. He said that he had to register for VAT last month, hence the new figure. The VAT situation won't have just crept up on him. He will have known that he was approaching the VAT threshold. I believe he had plenty of time to let us know about the change. We would then have had the option to agree the new quote or look elsewhere.

There is no possibility I would have expected him to warn us about his new circumstances and then expect he still proceeds with the work ex-VAT. That has never been a suggestion.

It seems straightforward - my understanding is that the customer must be aware of the VAT burden up front (it was made clear to us there was none) and that VAT must be set out on the quote which was agreed. You can’t retrospectively add VAT to the invoice - that would require a new quote showing the new VAT. I don't think there is any ambiguity there.

I raised this with him politely and he said that he 'had to' add the VAT to all the old quotes. I see nothing wrong in pointing out an improper course of action and I did let him off the hook by suggesting he may have been mis-advised. I feel it was valid to point out the legislation given his reply.

Yes, the situation has been rectified (I believe he is obliged to) and I have thanked him. I feel it would have been better if he had acknowledged it rather than suggesting I was unreasonable in querying his actions (as in his statement that everybody else was fine with it). 

Section62

MapleTrees said:

I'm struggling to see how the situation is not clear-cut. I have set out the communication trail. The trader quoted several weeks ago and we accepted the quote which was expressly ex VAT. After invoicing us post-work I queried the higher price. He said that he had to register for VAT last month, hence the new figure. The VAT situation won't have just crept up on him. He will have known that he was approaching the VAT threshold. I believe he had plenty of time to let us know about the change. We would then have had the option to agree the new quote or look elsewhere.

The bit which I don't think is clear cut is whether what he has done is illegal.

In relation to VAT registration, I'm not sure you can know what he knew unless he told you.  It isn't uncommon for small traders to discover they need to register for VAT - unless you've been involved in running a VAT registered company previously it is perfectly possible to have no idea about compulsory registration until someone (like an accountant) points it out to you.

It is one of the well-known risks of using traders who aren't VAT registered... the advantage of not having to pay VAT on their work comes at the risk of them becoming VAT registered while doing work for you.

MapleTrees said:

There is no possibility I would have expected him to warn us about his new circumstances and then expect he still proceeds with the work ex-VAT. That has never been a suggestion.

I'm aware of that and wasn't suggesting you did.  My point was that if the trader had done what he should have done and told you about the VAT issue before he started work then you wouldn't have got it for £850.  The £850 quote effectively ceased to exist at the point he became VAT registered - if one of the other quotes was cheaper then you could have gone with them instead, but if not, you would have had to pay more that £850.  So in that sense you have potentially gained financially by the trader's error.

MapleTrees said:

It seems straightforward - my understanding is that the customer must be aware of the VAT burden up front (it was made clear to us there was none) and that VAT must be set out on the quote which was agreed. You can’t backdate VAT on the invoice - that would require a new quote showing the new VAT. I raised this with him politely and he said that he 'had to' add the VAT to all the old quotes.

The BiB - as far as I know - is incorrect.  There is no requirement to issue a new quote, only to advise the customer that VAT would now be payable on top of the previously quoted price.

In your email to the trader you said "You can only add VAT to an existing quote if you cancel that quote and (before work commences) raise another with the new VAT element clearly set out.".  I believe that to be similarly incorrect.

If you are puzzled by the trader's responses to you it is possibly because you are telling them how to do their job, whilst being incorrect in what you are saying.

MapleTrees said:

I see nothing wrong in pointing out an improper course of action and I did let him off the hook by suggesting he may have been mis-advised. I feel it was valid to point out the legislation given his reply.

I doubt he feels you have "let him off the hook".  At most you could have reported him to the relevant enforcement authority, but as I've suggested, I doubt they would feel he had done anything wrong to warrant enforcement action.

The problem with pointing out the legislation is - as I pointed out in my previous post - the legislation doesn't state what you claim. If you suggest someone is acting unlawfully you have to be sure of the facts, else risk entering the territory of possible defamation.  I'm not a lawyer, but I would never have passed comment on the quality of the accountant's advice without being absolutely sure I was right about my interpretation of the law.

MapleTrees said:

Yes, the situation has been rectified. But I feel it would have been better if he had acknowledged it rather than suggesting I was unreasonable in querying his actions (as in his statement that everybody else was fine with it).

In my experience most people would pay the VAT in this situation, which fits with what he says.  If you'd said at the start of the thread the invoice was for £850 plus £170 VAT my advice would have been to pay it, or at least meet him in the middle, in order to keep a good relationship with traders who appear to be doing a good job.  (on the basis of what you initially posted I was expecting the bill to be several thousands).

Finding good traders is difficult to do at the best of times, so losing them by gaining a reputation of being somewhat 'difficult' is generally not a good idea. Incorrectly quoting legislation at them is an example of what may be seen as 'difficult'.

Please note that none of the above is intended as criticism of you or what you've done.  I'm posting for the benefit of other forum members who may be in a similar situation and read this in the future and believe the comments about the legal position to be correct.

You've got a good result with the original quoted price being honoured.  I would have left it at that.

MapleTrees

Section62 said:

In relation to VAT registration, I'm not sure you can know what he knew unless he told you.  

He did tell me - he registered for VAT last month, so had time to inform us about the extra cost (even if suddenly upon him).

My point was that if the trader had done what he should have done and told you about the VAT issue before he started work then you wouldn't have got it for £850.  The £850 quote effectively ceased to exist at the point he became VAT registered - if one of the other quotes was cheaper then you could have gone with them instead, but if not, you would have had to pay more that £850.  So in that sense you have potentially gained financially by the trader's error.

The figure on the agreed quote did not cease to exist once he became VAT registered, instead he became liable for VAT. However a new quote would indeed have gone up by 20%, and I would at least have had the option to accept (and budget for the increase) or reject it and look elsewhere. Having done some research in the last couple of days, his price for a tiny scaffold is apparently on the high side. Suggesting I've gained financially is strange and speculative at best (something you have just cautioned me against).

There is no requirement to issue a new quote, only to advise the customer that VAT would now be payable on top of the previously quoted price.

In your email to the trader you said "You can only add VAT to an existing quote if you cancel that quote and (before work commences) raise another with the new VAT element clearly set out.".  I believe that to be similarly incorrect.

Advising of the new price is tantamount to a new quote and describes the new VAT charge, unless agreed otherwise it obviates the pre-existing quote.

If you are puzzled by the trader's responses to you it is possibly because you are telling them how to do their job, whilst being incorrect in what you are saying.

I am reminding them of their obligations with respect to charging VAT after the fact. I was not incorrect. I feel you're seeking to find fault in the most obscure of areas which deflects from the very issue under discussion - retrospective addition of VAT to an invoice.

I doubt he feels you have "let him off the hook".  At most you could have reported him to the relevant enforcement authority, but as I've suggested, I doubt they would feel he had done anything wrong to warrant enforcement action.

Once again, there is no prospect that I would report him nor any hint that I would do so. By suggesting he 'may' have been wrongly advised in the conversation with his (unnamed) accountant, I was politely trying to avoid direct blame by giving him the benefit of the doubt. 

The problem with pointing out the legislation is - as I pointed out in my previous post - the legislation doesn't state what you claim. If you suggest someone is acting unlawfully you have to be sure of the facts, else risk entering the territory of possible defamation.  I'm not a lawyer, but I would never have passed comment on the quality of the accountant's advice without being absolutely sure I was right about my interpretation of the law.

The legislation appeared to make the point that a tradesman is not acting lawfully if he fails to include the VAT on the quote, but puts it on the invoice.

With respect to the (unidentified) accountant I used the word 'if' in a two-party private exchange, so I'm sure there is no issue there. I feel some of this is going too far.

MapleTrees said:

Yes, the situation has been rectified. But I feel it would have been better if he had acknowledged it rather than suggesting I was unreasonable in querying his actions (as in his statement that everybody else was fine with it).

In my experience most people would pay the VAT in this situation, which fits with what he says.  If you'd said at the start of the thread the invoice was for £850 plus £170 VAT my advice would have been to pay it, or at least meet him in the middle, in order to keep a good relationship with traders who appear to be doing a good job.  (on the basis of what you initially posted I was expecting the bill to be several thousands).

This rather side steps the point. What may be a low figure to you may not be considered low to others. It isn't so much about the amount of the VAT, but the fact he was incorrect to add it to the invoice. 

Finding good traders is difficult to do at the best of times, so losing them by gaining a reputation of being somewhat 'difficult' is generally not a good idea. Incorrectly quoting legislation at them is an example of what may be seen as 'difficult'.

Taking exception to VAT added after the fact, when expressly excluded on the quote, is not me being difficult. Like you, I'm not a lawyer - so we might both be interpreting it differently. Legislation does appear to cover the actions described. 

My reputation? Surely a trader known for retrospective invoicing is the one risking some reputational impact given the importance of reviews - he's not doing himself any favours if there are a raft of others in the same position as me who might be more vocal. I feel this could have been avoided if he'd done the right thing from the outset (trivial as you feel that sum is). The dialogue has been about his circumstances - there is no thought to my own.

Please note that none of the above is intended as criticism of you or what you've done.  I'm posting for the benefit of other forum members who may be in a similar situation and read this in the future and believe the comments about the legal position to be correct.

On the contrary. I think your position is distinctly critical of me.

You've got a good result with the original quoted price being honoured.  I would have left it at that.

Expecting the standing quote to be honoured should not really be seen as a good result, it should be a reasonable expectation. I think he can claim back the VAT on his material costs so may not entirely disadvantaged. 

Risteard

Section62 said:

MapleTrees said:

Should I even respond to this?  Or I could politely point out the rules - in case he genuinely doesn't know that it's illegal to invoice for VAT without raising a new quote first for the client to agree?

I have my doubts it is "illegal" to do what the trader has done.  The relevant legislation is designed to deal with traders who deliberately set out to con customers.  It doesn't make any provision for situations where there is a change of circumstances, for example becoming VAT registered.

In any event, I doubt the enforcement authority (probably the local authority in this case) would have any interest in prosecuting an otherwise honest trader who found themselves caught in the VAT registration trap.

The trader has done wrong in not communicating to you that he would now have to add VAT to the previously quoted price, but has corrected that by (apparently) taking the loss himself.

With regard to the bathroom quote, you don't have to be VAT registered to include a VAT line on a quotation.  What you can't do is to charge VAT on your own work: that is unlawful if you aren't VAT registered.  But for example it wouldn't be unlawful to quote on the basis of "Bathroom fittings, tiles, materials etc = £10000,  VAT on above = £2000,  Labour £1000" - in other words showing that £2000 of the bill would be VAT paid on materials etc that had to be purchased.  Sometimes traders who do this don't make it clear the VAT is on what they are buying, not their own work... but I don't know whether that is what happened in your case.

I believe it is actually unlawful to describe any of it as "VAT" if not VAT registered. Obviously the price on which the amount is based will take account of any VAT element paid by the trader - however the trader is not himself charging VAT and therefore can't describe it as such.