VAT status on supply and installed purchased via third party

[djcdan]

We're purchasing a supply and install package for a treatment plant. The installation team is associated with the manufacturer, but the manufacturer doesn't sell directly to us. We are purchasing the supply and installation as a complete package through our local building merchant.

On a usual supply and fit job, I'd expect to have the VAT zero rated, but since it's being purchased through a merchant, am I correct in saying the VAT is applied to the invoice to be claimed back at build end?

[ProDave]

NO

 

Supply and fit to a new build must be zero rated, you will not be able to claim it back.  Don't agree to the contract unless they agree this.

 

Otherwise separate supply and fit to separate invoices so at least you can claim back VAT on supply.  (this happens if the installer is not VAT registered)

[djcdan]

Ok. So even if the installer is not employed or instructed to complete our job by the building merchant, the invoice from the building merchant should be zero rated?

 

I put in the order this morning, but will contact them now to clarify this with them to make sure everything is clear.

[Bitpipe]

2 hours ago, djcdan said:

Ok. So even if the installer is not employed or instructed to complete our job by the building merchant, the invoice from the building merchant should be zero rated?

 

I put in the order this morning, but will contact them now to clarify this with them to make sure everything is clear.

 

So there are only two possibilities here. Just follow the money

 

1) BM is supplying goods to you (you pay the bill, your name, and address is on invoice). These will have VAT applied which you can reclaim at end of build. The installer also invoices you for their work and this is zero rated. i.e. you have a direct commercial relationship with two parties, two payments, two  invoices etc.

 

2) BM supplies goods to installer who brings them to site and does the install. You will received one invoice and make one payment only to the installer. This whole invoice needs to be zero rated for VAT. If merchant charges VAT to installer then it's the installer's responsibility to either get that zero rated or claim of their own VAT bill.

 

Clear?

[pepelepeu]

Hi 

If I can jump in here...

I am struggling with my contractor to understand that he can reduce his VAT to 5% for my conversion. Is there a clear mandate somewhere that I can show him to clear up the confusion?

 

many thanks

[djcdan]

22 minutes ago, Bitpipe said:

 

So there are only two possibilities here. Just follow the money

 

1) BM is supplying goods to you (you pay the bill, your name, and address is on invoice). These will have VAT applied which you can reclaim at end of build. The installer also invoices you for their work and this is zero rated. i.e. you have a direct commercial relationship with two parties, two payments, two  invoices etc.

 

2) BM supplies goods to installer who brings them to site and does the install. You will received one invoice and make one payment only to the installer. This whole invoice needs to be zero rated for VAT. If merchant charges VAT to installer then it's the installer's responsibility to either get that zero rated or claim of their own VAT bill.

 

Clear?

 

It is. Cheers.

I just discussed zero rating the invoice for a supply and install through the DIY Housebuilder's scheme with the Building Merchant and they didn't have a scooby what I was on about!

 

I'll discuss with the manufacturer who appoints the installer about the best option to move forward on this.

[djcdan]

14 minutes ago, pepelepeu said:

Hi 

If I can jump in here...

I am struggling with my contractor to understand that he can reduce his VAT to 5% for my conversion. Is there a clear mandate somewhere that I can show him to clear up the confusion?

 

many thanks

 

I get this all the times with contractors too. They make it seem like I'm trying to rob them blind.

 

The best one I've found is the summary on the topic by Homebuilding and Renovating. Of course, there is the guide on HMRC's website about the scheme which is a little more formal, but more difficult to follow.

[pepelepeu]

1 hour ago, djcdan said:

 

I get this all the times with contractors too. They make it seem like I'm trying to rob them blind.

 

The best one I've found is the summary on the topic by Homebuilding and Renovating. Of course, there is the guide on HMRC's website about the scheme which is a little more formal, but more difficult to follow.

Many thanks djcdan, very helpful and another string to my bow so to speak!

[Bitpipe]

You usually need to provide a copy of your planning permission to show that you're eligible for the appropriate scheme and then send a link to the HMRC website.

 

This link is pretty simple and is what I sent to any wavering contractors.

 

https://www.gov.uk/vat-builders

[newhome]

7 hours ago, pepelepeu said:

Hi 

If I can jump in here...

I am struggling with my contractor to understand that he can reduce his VAT to 5% for my conversion. Is there a clear mandate somewhere that I can show him to clear up the confusion?

 

many thanks

You can also refer him to VAT Notice 708 section 7 or 8 depending on your conversion

 

https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section7

 

 

 

[Temp]

8 hours ago, pepelepeu said:

Hi 

If I can jump in here...

I am struggling with my contractor to understand that he can reduce his VAT to 5% for my conversion. Is there a clear mandate somewhere that I can show him to clear up the confusion?

 

many thanks

 

Its all in VAT 708.

 

In some cases (charity buildings?) HMRC require you to give the contractor a "certificate" which is basically a letter with your details, the plot details and your planning reference number. Also has words such as "I certify your supply relates to a non-residential building being converted to a dwelling and accordingly qualifies for 5% VAT". Think there is an example in VAT 708. I don't believe you need to give him a certificate but sometimes it can help. Several people on the forum have made up their own certificate.

 

 

[pepelepeu]

21 hours ago, Bitpipe said:

You usually need to provide a copy of your planning permission to show that you're eligible for the appropriate scheme and then send a link to the HMRC website.

 

This link is pretty simple and is what I sent to any wavering contractors.

 

https://www.gov.uk/vat-builders

 

Thank you that's very helpful.

[pepelepeu]

17 hours ago, newhome said:

You can also refer him to VAT Notice 708 section 7 or 8 depending on your conversion

 

https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section7

 

 

 

Yes I have now sent him a link, many thanks

[pepelepeu]

16 hours ago, Temp said:

 

Its all in VAT 708.

 

In some cases (charity buildings?) HMRC require you to give the contractor a "certificate" which is basically a letter with your details, the plot details and your planning reference number. Also has words such as "I certify your supply relates to a non-residential building being converted to a dwelling and accordingly qualifies for 5% VAT". Think there is an example in VAT 708. I don't believe you need to give him a certificate but sometimes it can help. Several people on the forum have made up their own certificate.

 

 

Thanks Temp, I'll wait and see how he responds to the link that I ave now sent.

[Bitpipe]

On 02/09/2020 at 15:21, pepelepeu said:

 

Thank you that's very helpful.

 

My experience was that people who weren't familiar with the scheme (and us self builders are still quite rare) thought I was chancing my arm and I know businesses are very wary of fiddling VAT more so than any other tax.

 

When I presented it as a formal note with PP, HMRC weblink and relevant excerpts attached, it went much more smoothly and they usually sent it to their accounts dept to get the once over.

 

I was blissfully unaware when I paid for my ground investigation though and failed to get them to retrospectively refund & reclaim the VAT - that one is a bit grey but the guidance does say that any work done with tools (vs walk over or desk based surveys) that is intimately connected with the construction and after PP is granted is eligible for zero rating.

 

Had I known, I'd have made them zero rate a good chunk of the fees before agreeing to the SOW, live and learn etc.

[pepelepeu]

On 04/09/2020 at 14:39, Bitpipe said:

 

My experience was that people who weren't familiar with the scheme (and us self builders are still quite rare) thought I was chancing my arm and I know businesses are very wary of fiddling VAT more so than any other tax.

 

When I presented it as a formal note with PP, HMRC weblink and relevant excerpts attached, it went much more smoothly and they usually sent it to their accounts dept to get the once over.

 

I was blissfully unaware when I paid for my ground investigation though and failed to get them to retrospectively refund & reclaim the VAT - that one is a bit grey but the guidance does say that any work done with tools (vs walk over or desk based surveys) that is intimately connected with the construction and after PP is granted is eligible for zero rating.

 

Had I known, I'd have made them zero rate a good chunk of the fees before agreeing to the SOW, live and learn etc.

 

 

Yes Bitpipe, that is what I have done for my drainage guy, printed out the relevant part of VAT note 708. He is quite happy now!

 

Thanks for your help.