VAT

[Jenjen]

We have received our first tender response back from a contractor, with the rest to follow. VAT has been included within the quote. As a self builder (via a main contractor) should we not benefit from the zero rated VAT position,  how have other main contractors dealt with this?

 

Edited August 15, 2019 by Jenjen

[newhome]

Yes eligible work for a self build should be zero rated when on a supply and fit basis. Point the contractor as VAT Notice 708 and ask them to zero rate. 

 

More info here:

 

https://forum.buildhub.org.uk/topic/6851-a-guide-to-the-vat-reclaim-process/?do=findComment&comment=115965

 

 

[Bitpipe]

1 minute ago, newhome said:

Yes eligible work for a self build should be zero rated when on a supply and fit basis. Point the contractor as VAT Notice 708 and ask them to zero rate. 

 

More info here:

 

https://forum.buildhub.org.uk/topic/6851-a-guide-to-the-vat-reclaim-process/?do=findComment&comment=115965

 

 

 

You'll need to send them your PP to confirm that the build is eligible (i.e. demo & rebuild or green field site).

[nod]

It’s quite normal to tender like this

As a contractor I send all tenders in plus vat 

As states above If you show the successful contractor your planning content He or She will simply zero rate all labour 

[Ed Davies]

37 minutes ago, nod said:

… He or She will simply zero rate all labour

 

… and materials. Even Gods, with capitalized pronouns, don't take precedence over HMRC.

[nod]

No I never zero rate materials 

[Jeremy Harris]

3 minutes ago, nod said:

No I never zero rate materials 

 

You must, if it's a combined labour and materials job on a qualifying zero rated build.

 

Only those selling materials only, with no labour, can charge VAT on materials for a qualifying build.

[Jenjen]

Thanks everyone. I’ll check in with the contractor but sounds like we can disregard the VAT figure for now

[Thedreamer]

1 hour ago, nod said:

No I never zero rate materials 

 

2 hours ago, nod said:

It’s quite normal to tender like this

As a contractor I send all tenders in plus vat 

As states above If you show the successful contractor your planning content He or She will simply zero rate all labour 

 

Have you recently become VAT registered?

 

I would recommend getting the invoices in front of you and totting up how much this is. Depending on the size and date of the invoices you might be able to correct this on your next return.

 

As well as dealing with your VAT position your problem is going to be that your customers are not going to be able to get the VAT back from the HMRC on the DIY scheme. 

[Thedreamer]

1 hour ago, Jenjen said:

Thanks everyone. I’ll check in with the contractor but sounds like we can disregard the VAT figure for now

 

I would just ask them to provide a quote correctly you don't want any misunderstandings at a later date.

 

To be honest if I told them it was residential build and they quoted with VAT it would leave a slight negative impression with me. 

[nod]

25 minutes ago, Thedreamer said:

 

 

Have you recently become VAT registered?

 

I would recommend getting the invoices in front of you and totting up how much this is. Depending on the size and date of the invoices you might be able to correct this on your next return.

 

As well as dealing with your VAT position your problem is going to be that your customers are not going to be able to get the VAT back from the HMRC on the DIY scheme. 

37 years ?

[Thedreamer]

10 minutes ago, nod said:

37 years ?

 

Cripes, surprised your accountant (or customer) never spotted that.

 

Your loss as things currently stand would be the VAT on the markup applied by you on the price of the materials.

 

 

[Oz07]

How so the percentage is added on isn't it? It's not as if the margin will improve if vat at zero. Or am I missing something?

[nod]

The way that commercial site work 

works out We don’t make a penny on the materials So the vat is simply passed on the same as the labour 

With most of the larger jobs taking 90 days to pay out Often the materials far outweigh the labour 

I can be in a position where 50 k is laid out on labour and materials 

With only a few thousand profit  

 

One off houses Like yours I would simply say Supply the materials yourself or claim the vat back at the end 

 

Ive a site of houses that I’m doing at the moment I supply the labour plaster and Abito boards 

3 days work for a gang of boarders 

2 or 3 for skimming 

I make £550 per plot Any remedial in with that 

Materials £3000 vat £600 

Why would I soak up the vat 

The builder could make the same phone call as me But he is happy enough that I’m financing part of his business already 

 

I’ve obviously an accountant But they don’t get involved with the vat 

 

We had a really good quote for block and beam Less than what I could buy the stuff 

While the 0 rated the half days labour I had to pay the vat on the material

The guy gave the same reasons as above

 

It is what it is  

[Jeremy Harris]

The VAT rules for self-build seem clear. 

 

If a contract is for labour and materials then the person doing the work must zero-rate the whole bill, both labour and materials.  They cannot charge VAT for the materials part.

 

If a contract is labour-only, then the labour must be zero-rated and the self-builder must buy the materials themselves, with their name and address on the receipts, in order to reclaim the VAT.

 

 

[Oz07]

I think a lot of nods work is to other VAT registered contractors so doesn't really have much impact. They reclaim Any way. That being said I wouldn't apply vat on part of the invoice. All or nothing

[Thedreamer]

2 hours ago, nod said:

The way that commercial site work 

works out We don’t make a penny on the materials So the vat is simply passed on the same as the labour 

With most of the larger jobs taking 90 days to pay out Often the materials far outweigh the labour 

I can be in a position where 50 k is laid out on labour and materials 

With only a few thousand profit  

 

One off houses Like yours I would simply say Supply the materials yourself or claim the vat back at the end 

 

Ive a site of houses that I’m doing at the moment I supply the labour plaster and Abito boards 

3 days work for a gang of boarders 

2 or 3 for skimming 

I make £550 per plot Any remedial in with that 

Materials £3000 vat £600 

Why would I soak up the vat 

The builder could make the same phone call as me But he is happy enough that I’m financing part of his business already 

 

I’ve obviously an accountant But they don’t get involved with the vat 

 

We had a really good quote for block and beam Less than what I could buy the stuff 

While the 0 rated the half days labour I had to pay the vat on the material

The guy gave the same reasons as above

 

It is what it is  

Your VAT registered business to business customers if supplied on a cost basis (and HMRC) won't be out of pocket.

 

Non registered customers for new builds and would be. 

 

We can't decide how we apply VAT legislation ourselves, we must all be compliant with the same rules otherwise the system fails and somebody loses out.

 

This may be of some interest to you, might be worth sitting down with your accountant to discuss.

 

https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services