Stupid question on VAT

[Moonshine]

I have a rather stupid question and VAT and claiming it back.

 

Let's say I am building a 100m2 house and it's £1,500 + VAT per m2. So £150,000 not including VAT, and £180,000 including the VAT.

 

What happens to paying the VAT, do I have to pay the builder inc the VAT and then claim it back at the end? Or do I pay not including the VAT.

 

The reason I ask is that effectively if i have to pay the VAT throughout i would need to borrow £30k extra, only for it to be paid back.

 

How does it work, and how do you manage the VAT extra amount?

[PeterW]

Not a stupid question. 
 

if you are paying the builder for labour and materials then he should zero rate everything to you. So if your build consisted of £50k labour and £100k ex VAT materials, you would pay him £100k. He would pay £120k for the materials (£100k plus 20% VAT) and then he would reclaim the £20k on his VAT return. 
 

if you purchase the materials for him, you would pay the £120k out but then reclaim it at the end. In that instance you would reclaim the £20k. 
 

If it’s supply and fit by a VAT registered trader they MUST zero rate the whole invoice otherwise it cannot be reclaimed. 

[newhome]

Have a read of this post as there are some nuances of the VAT system that’s it’s good to be aware of. The post doesn’t cover all of these but gives an overview. 
 

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