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

Cimscate

I don't know the legal position on it but if I received a letter like this from a trader I would tend to just ignore it and see if you get a 2nd letter! Morally I would not feel obliged to pay it as I had accepted and agreed the quote before work was done. Don't think his business will last long if he did not consider the possibility 6 months into his financial year

rochdalefan

As an accountant we keep an eye on VAT thresholds so they know they will have to register before they quote. Most clients who register late absorb the cost unless the person they are working for is VAT registered and can reclaim the VAT themselves. The quote they have you didn’t mention VAT so you have no obligation to pay. It isn’t your fault that they didn’t keep an eye on their thresholds. They will be able to reclaim VAT on any materials used so won’t be as out of pocket as you would think when they pay HMRC

rochdalefan

No they don’t. They work on rolling turnover and if you exceed the £90k in a 12 month period (working month by month) then you have 30 days from the end of that month to register and you register from the 1st of the month after that. You only have to register backdated if you miss this or you have £90k in a 30 day period. This guy will have exceeded the threshold April to March so should have registered by 30th April from 1st May. If he didn’t notice till later the 1st May is still the date he must register from

highlander58

Of course you don’t pay! The suggestions to check with HMRC, Citizens Advice or even a solicitor! are a completely waste of your time & money.
You agreed a price & paid in full - end of. If his quote had been £1500 higher due to VAT, you might have chosen someone else for the job.
You’re not liable for his lax accounting. If his business goes under due to retrospective VAT liabilities, your £1500 will be a drop in the ocean.

There’s no moral dilemma here. If he was a good friend or family, there might be.

Section62

https://forums.moneysavingexpert.com/discussion/comment/81936160#Comment_81936160

why was he not aware of this fact within the 4 months he gave the quote, VAT free, and did the work?

Likely because he didn't know he should have been VAT registered until some point after August (2025). VAT registration can be backdated - either voluntarily, or compulsorily. HMRC have the power to backdate the registration - by many years if they wish - and there is not much the trader can do about it.

For those here not familiar with VAT, the scenario is similar to not knowing you need to register for Self Assessment. Our tax system expects you to know whether you should register, and fines and/or charges you (which can extend back multiple years) if you haven't. The attitude of HMRC is 'tough cheese', even if it results in your bankruptcy.

The OP has no legal obligation to pay the additional VAT, but folk here accusing the trader of fraud or pulling a fast one - whilst apparently having little understanding of the VAT system themselves - should perhaps reflect on @MSE_Kelvin 's words in the first post. "Remember that behind each dilemma there is a real person so, as the forum rules say, please keep it kind and keep it clean." In this situation there is more than one person involved, and there is a good chance the trader had no idea they needed to register for VAT until someone told them. The financial consequences of compulsory retrospective registration can be ruinous. There's no need for folk on this forum to pile accusations of illegality and bad faith on top of that, because we simply don't know how the trader got themselves into the position where they felt they had to go back to clients and ask for more money.

2702

Do not pay him. I would contact HMRC to clarify. This guy is a chancer. Lots of businesses start up and do not charge VAT. They cannot come back later to request this. If everybody did this we would all be getting bills the next year for their vat ( if they suddenly earned over the limit).

This would also affect when getting quotes who included VAT and who did not and if they did not quote for VAT would they bill you the next year for it if they went over the limit? don't be ridiculous.

You need to report this guy to HMRC how many other people is he doing this to? It has to be stopped.

john_evmk

If his registration was backdated to 1 May, he is legally required to pay VAT to HMRC for work done after that date. To recover this from you, he must issue a valid VAT invoice.

If your original quote or agreement did not mention VAT (e.g., it was a "fixed price" or "total price"), it is generally assumed to be VAT inclusive for a consumer.

If the contract was silent on VAT or stated a total price, he may have no legal right to demand an extra 20% now; it is his "mistake" or oversight, and he may have to absorb that cost out of his own profit.

If the contract specifically stated "£X + VAT" or "exclusive of VAT," he likely has the right to bill you for it now that he is registered.

If you had a verbal agreement with no mention of VAT, the legal position generally favours you as the consumer. In the UK, when a trader provides a price to a member of the public (a "consumer" rather than another business), that price is legally presumed to be the total price, including any taxes. If he didn't mention VAT at the time, you are entitled to assume the price you agreed upon was the final amount.

You are in a strong position to refuse the bill, but since you are happy with his work, you might want to handle it diplomatically:

• State the facts: Remind him that the price agreed was a total, fixed price and that VAT was never mentioned;
• Point to Consumer Law: Gently mention that for domestic customers, quotes are understood to be inclusive of all taxes unless stated otherwise;
• The Compromise: If you want to be helpful, you could ask for a VAT invoice that shows the original price paid as the "gross" amount (meaning the VAT is taken out of what you've already paid him). This doesn't cost you more, but it allows him to claim the VAT back on his materials for that job, which might lower his own tax bill. This "gross invoice" approach would also lower the contractor's liability on VAT from £1,584 to £1,320.

outtatune

If he contacted you after the work was completed to say that his van had broken down while he was working on your job and it was going to cost £1584 to repair, so here's an invoice, you'd not have any kind of dilemma, moral or otherwise, as to whether you should pay.

This is the same.

Paying VAT is his responsibility, not yours, just as paying for his van to be fixed is his responsibility, not yours. He has a variety of costs of doing business that he needs to factor in when he quotes for work. If he fails to do so it's not up to you to bail him out.

Section62

https://forums.moneysavingexpert.com/discussion/comment/81936418#Comment_81936418

A broken down van and collecting VAT isn't the same.

The liability for VAT is on the end customer. The trader's responsibility is to register for VAT and to collect the correct amount of VAT from the customer on behalf of HMRC and to account to HMRC for their VAT activities. If the trader fails to collect the correct amount of VAT from the customer then it is their problem to sort out, but they aren't being wholly unreasonable in asking customers they should have collected VAT from to consider paying the VAT due… the nuance is in how the request is framed, and understanding the limited obligation the customer has to pay.

It is one of the risks that a client takes in employing a non-VAT registered trader. The OP is 'lucky' that the work has been completed, invoiced and paid for. The situation would be different if the trader had only just started work on the project and discovered they should be VAT registered.

A customer would never be obligated to pay for repairs to a broken down van, unless there was something specific in the contract to that effect (which would be very unusual). So unless the client was liable in some way (for example they had damaged the trader's vehicle) there wouldn't be a situation where a request to pay for van repairs would be a normal part of doing business.

outtatune

https://forums.moneysavingexpert.com/discussion/comment/81936446#Comment_81936446

Absolute tosh. It is an offence under the Digital Markets, Competition and Consumers Act 2024 to quote a price to a consumer as anything but a total, VAT inclusive price. So if the builder originally quoted '£7920' then that figure ALREADY INCLUDES THE VAT and thus the customer has already paid the VAT.