Money Moral Dilemma: Should I pay a builder's VAT bill months after the work was done?

MSE_Kelvin

This week's MoneySaver who wants advice asks…

I’ve been sent a £1,584 VAT bill by a contractor who did work in my garden over a year ago, and more drainage/building work in August. At the time, he didn’t charge VAT for either job as he wasn’t VAT-registered. He now says he had to register from 1 May and needs to charge VAT, so is billing me for the later work. I don’t doubt it’s true, and he did a good job, but surely this is his mistake? Can he really charge me retrospectively?

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El_Torro

Where he stands legally will depend on what the two of you agreed at the time. What was agreed and what he can prove are not necessarily the same thing of course.

If you are happy with the work done and feel that the price (including the extra £1,584 you are being asked to pay now) is reasonable then I would be inclined to pay. Assuming you are able to pay of course, £1,584 isn't pocket change.

Maegi

If he's done this work via a limited company and had other clients, you may find that his company folds so your contribution may not even find it's way to HMRC.

I would probably dig a little deeper before you make a decision.

Marineboy81

Absolutely not. He quoted and invoiced and you paid that amount. It’s his responsibility to know whether VAT is due and his liability for any error on his part. He needs to swallow this himself and treat the payment you made as VAT inclusive giving him a bill of around £1300. His request is not legally enforceable. You had a contract. (Speaking as someone who runs a sole trader plumbing and heating business).

Ed264

Rather than getting the inevitable varying answers on here, I'd say this is a straightforward case of speaking to a Solicitor or contacting HMRC for their stance on this.

Cazmania777

At last a good moral dilemma! Be interesting to know if it was a careless or deliberate mistake not to register 😉

A couple of things to consider.

1. As another contributor has mentioned, whether you legally have to pay, depends on what was agreed when he quoted for the work.
2. If the work undertaken involved both building materials and labour (be easy to see, if it was split on the bill), he will be able to reclaim the VAT back on the materials. So perhaps you could split the bill and agree to pay the VAT on the labour only. I don't think there would be a downside there that I can think of, except of course having to pay at all. I'm sure someone will put me right if there is and I've missed it.

Pennypinch_2

If the work was quoted and agreed at a set price with no mention of VAT, then that price is usually treated as VAT-inclusive. A contractor can’t normally come back later and add VAT on top just because they’ve since registered.

If VAT applies, it’s typically for the contractor to account for out of what was originally agreed, not something they can retrospectively charge unless the quote clearly stated “+ VAT”.

So in this situation, it sounds like their issue rather than yours.

ripongrammargirl

Ever head of “pulling a fast one?!!” If he was not VAT registered at the time of the work, he cannot retrospectively ask for this money! Your work is over and done with and paid in full (I hope!), VAT free due to his former income circumstances. This has nothing to do with any of his jobs from now onwards. You are not obliged to pay any of his VAT that is now being charged on his business and future customers.
Can’t decide if this is a great move on his part for trying to get cash from former clients for his “rainy day fund” or just complete cheek. Either way, as we say in Yorkshire, you owe nowt!

Rememberscarborough

It's a horrible rule that expects contractors to guess whether they'll go over £90,000 turnover in their first year. If business takes off you end up with a situation like this. If they register for VAT immediately and business is slow it can cost them enough money to drive them under. There's got to be a better way to help small contractors.

Rememberscarborough

The VAT man is retrospectively demanding their money!!

keithyno.1

You say, "I don't doubt it's true." Well I would doubt it, very much! As has already been suggested by another poster, get legal advice from a solicitor or Citizens Advice or contact HMRC for further clarification, before you pay another penny to this guy.