VAT on site preparation

[Plumbersmateuk]

I have just recieved an estimate from a tree surgeon to remove trees from site prior to soil survey.

 

It obviously has a VAT element, I just need to clarify that even at this early stage I do not have to pay the VAT.

 

I have kept all receipts for items that I have purchased so far.

 

TIA

[ToughButterCup]

A quick search within the site for the term VAT  will give you all the answers you need. 

 

From memory (imperfect at best) VAT charges for services are not  reclaimable.

The general guidance is very simple. If it's built into the house, you can reclaim the VAT. So a wardrobe bought in a shop isn't VAT reclaimable, but a built-in wardrobe is.

 

Look at @JSHarris blog (or was it a post, can't recall) where he details the general rules and - and this is the important bit - he lists the gottchas. 

In haste,

Ian

[Plumbersmateuk]

Thanks I did search first but I guess I was being lazy

Edited September 4, 2017 by Plumbersmateuk
Spelling

[Jeremy Harris]

Removing trees from the site, prior to development, and as a required part of the development (don't mention the survey!) is a zero rated activity, so just give your tree firm a note with the planning approval reference number and you should be fine.  If you don't yet have approval, then with luck you should just be able to use the description of the site that will be on the planning application, with your name, as evidence that the work is a part of a development that will be zero rated for VAT.

 

Costs specifically related to surveys only are not generally zero rated for VAT, hence the need for caution in the wording!

[Temp]

Vat 708 says...

 

 

Quote

3.3.4 Work closely connected to the construction of the building

Subject to sub-paragraph 3.3.6, your work is closely connected to the construction of the building when it either:

(a) allows the construction of the building to take place, such as when you:

• demolish existing buildings and structures as part of a single project to construct a new building or buildings in their place (please note that the granting of a right to remove materials is not the supply of demolition services and is standard-rated) * provide or improve an access point to a building site to allow deliveries to be made
• carry out ground works (including the levelling and drainage of land) as part of the process of constructing a new building or buildings in its place
• provide site clearance or ‘builders’ clean’ services
• secure the site

If there is a question I would class it as part of the site clearance.

Edited September 4, 2017 by Temp

[Plumbersmateuk]

Thanks for the additional information, much appreciated.

For info purposes only the soil survey is not a condition of the planning application/approval.

Understand what you are saying and thanks

[Temp]

Reminder: Make sure you get your CIL exemption paperwork done before starting any work on site.

[Plumbersmateuk]

2 hours ago, Temp said:

Reminder: Make sure you get your CIL exemption paperwork done before starting any work on site.

Right so even site clearance constitutes work starting?

I have to be honest I never realised that, I have already downloaded all the CIL bumf, soI will get on to that at the weekend.

The council had wanted a seperate application for the tree removal but the tree surgeon reckons he can get it within "the scope of works as part of the job" (his words).

Thanks for the 'eads up

 

Pics here in case you hadn't seen 'em:

 

[PeterW]

Read the flowchart carefully as you have to wait for certain confirmation before you start. 

 

You must get your exemption first before you send your commencement notice otherwise it's invalid. 

[Temp]

The top of the form...

https://ecab.planningportal.co.uk/uploads/1app/forms/form_7_self_build_part_1_exemption_claim.pdf

 

 

Quote

An exemption for a self build home must be granted prior to the commencement of the development AND a Commencement (of development) Notice must be received by the Charging/Collecting Authority prior to the date of commencement of the development. The applicant will otherwise be liable for the full levy charge.

 

I don't think the CIL legislation defines Commencement of work but for Planning purposes there is a definition in the Town and Country Planning Act section 56..

 

http://www.legislation.gov.uk/ukpga/1990/8/section/56

 

So you might be ok clearing tree but personally I wouldn't give them any excuse.

 

http://www.wslaw.co.uk/knowledge-centre/newsletter/article/176/commencement-of-development-practical-tips-and-pitfalls

 

Quote

What effect does commencement have on CIL?

Commencing development will trigger the requirement to pay community infrastructure levy (CIL) sums. The meaning of commencement of development for the purposes of the CIL Regulations 2010 is the same as section 56(4) and will include, for example, demolition and other minor works.

Unless the charging authority has published an instalment policy sums will be payable within 60 days from the date of commencement.

To avoid financial penalties and ensure that you do not fall foul of the CIL Regulations in relation to commencement, it is vital that you submit the following before commencement:-

• Assumption of Liability Notice (if not, the charging authority may have to apportion liability to the landowners and a surcharge would be payable);
•  
• Commencement Notice of the intended date of commencement (if not, the charging authority may have to determine a deemed commencement date and surcharges are payable for this and the failure to submit the notice);
•  
• (if applicable) social housing relief claim and obtain the authority’s decision (if not, entitlement to the relief will lapse and cannot be claimed)

 

 

Edited September 5, 2017 by Temp

[Plumbersmateuk]

Ah thanks for your input much appreciated.

I will have a real good read at the weekend.

From the wslaw web site " Commencing development means undertaking some limited works on site to commence a planning permission and thus keep it alive.  The works must be done within the time period expressed on the permission. For a detailed permission this is a 3 year period "

From this it would suggest that the clearing of the trees is not  a commencement as it would not be enough to keep the planning alive.

But I take your point " So you might be ok clearing tree but personally I wouldn't give them any excuse "

[Plumbersmateuk]

Hoping some one can clarify:

Spoken to tree surgeon and done a bit of investigative work.

He is in the "VAT Flat Rate Scheme" and it would appear that if he were not to charge me VAT he would still have to include it in his return and pay his percentage.

Obviously he is inclined not to want to do the work.

There must some of you who have dealt with people in the VAT Flat Rate Scheme.

Is there no way round this?

 

[Jeremy Harris]

Everyone that is VAT registered is required to charge the appropriate VAT rate, or zero rate, goods and services if that is what the law requires.  It doesn't matter what arrangement your tree surgeon has for paying VAT, in this case there would be no VAT payable by him to HMRC, as the work to you would be zero rated.  This is something that anyone dealing with work where reduced, or zero, rates apply will be familiar with, but from the sound of things it's not something your tree surgeon has come across before, probably because he's never done work related to a new build before.

 

Get him to ring the HMRC helpline, and they will help him understand how he deals with it on his side when he comes to do his return.

 

Needless to say, if he incorrectly charges you VAT you cannot claim it back later.

Edited September 11, 2017 by JSHarris

[Temp]

Is there no way round this?  Probably not...

https://www.accountingweb.co.uk/tax/business-tax/vat-and-flat-rate-scheme-neil-warrens-top-ten-tips

Quote

A business that has an unpredictable level of zero-rated income e.g. a builder carrying out some work on new houses is probably best advised to steer clear of the scheme.

 

If you really want to use him...  A compromise might be to ask him what his flat rate is and agree to pay that cash in hand so he's not out of pocket. I think it should be quite a bit less than 20%. Normally businesses only pay the HMRC the difference between VAT they charge and VAT they pay. The flat rate is meant to simplify this and means they cannot reclaim VAT on purchases so the rate is lower.

 

Edited September 11, 2017 by Temp

[Bitpipe]

28 minutes ago, Plumbersmateuk said:

Hoping some one can clarify:

Spoken to tree surgeon and done a bit of investigative work.

He is in the "VAT Flat Rate Scheme" and it would appear that if he were not to charge me VAT he would still have to include it in his return and pay his percentage.

Obviously he is inclined not to want to do the work.

There must some of you who have dealt with people in the VAT Flat Rate Scheme.

Is there no way round this?

 

 

Our electrician had the same issue, he did some pre-demo site work and had to re-issue the VAT receipt after contacting HMRC to change his scheme - IIRC he had to swallow some of the VAT as I could not claim it back and he had already submitted his VAT payments for that period.

[Plumbersmateuk]

4 minutes ago, JSHarris said:

Everyone that is VAT registered is required to charge the appropriate VAT rate, or zero rate, goods and services if that is what the law requires.  It doesn't matter what arrangement your tree surgeon has for paying VAT, in this case there would be no VAT payable by him to HMRC, as the work to you would be zero rated.  This is something that anyone dealing with work where reduced, or zero, rates apply will be familiar with, but from the sound of things it's not something your tree surgeon has come across before, probably because he's never done work related to a new build before.

 

Get him to ring the HMRC helpline, and they will help him understand how he deals with it on his side when he comes to do his return.

 

Needless to say, if he incorrectly charges you VAT you cannot claim it back later.

Yep that is how I see it and I pointed out to him that I would not be able to claim it back.

Looking on the .gov website it does seem to be different for the Flat Rate Scheme, or that's the way I interpret it.

I will try and speak to my old accountant tomorrow and see if they can clarify this.

 

Thanks for your reply

[Temp]

We were posting at same time so hope you didn't miss mine above.

[Plumbersmateuk]

2 minutes ago, Temp said:

Probably not...

https://www.accountingweb.co.uk/tax/business-tax/vat-and-flat-rate-scheme-neil-warrens-top-ten-tips

 

 

 

If you really want to use him...  A compromise might be to ask him what his flat rate is and agree to pay that cash in hand so he's not out of pocket. I think it should be quite a bit less than 20%. Normally businesses only pay the HMRC the difference between VAT they charge and VAT they pay. The flat rate is meant to simplify this and means they cannot reclaim VAT on purchases so the rate is lower.

 

 

2 minutes ago, Bitpipe said:

 

Our electrician had the same issue, he did some pre-demo site work and had to re-issue the VAT receipt after contacting HMRC to change his scheme - IIRC he had to swallow some of the VAT as I could not claim it back and he had already submitted his VAT payments for that period.

Ah OK I think that clears that up...........many thanks off to do some haggling

[Bitpipe]

4 minutes ago, Bitpipe said:

 

Our electrician had the same issue, he did some pre-demo site work and had to re-issue the VAT receipt after contacting HMRC to change his scheme - IIRC he had to swallow some of the VAT as I could not claim it back and he had already submitted his VAT payments for that period.

 

Just to give more detail, he was a bit slow in invoicing me for the earlier work as it was only a few hundred pounds and we had the bigger job coming once the house was up. So by the time I got sight of the first invoice it was too late for him to change it.

 

I recall his saying that it was much of a muchness to be on either scheme financially, more of a convenience issue.

[Plumbersmateuk]

Just now, Bitpipe said:

 

Just to give more detail, he was a bit slow in invoicing me for the earlier work as it was only a few hundred pounds and we had the bigger job coming once the house was up. So by the time I got sight of the first invoice it was too late for him to change it.

 

I recall his saying that it was much of a muchness to be on either scheme financially, more of a convenience issue.

I used to be VAT registered before the scheme was introduced and realise the amount of work it saves for a small/one man business.

 

[AliMcLeod]

4 hours ago, Plumbersmateuk said:

 

Ah OK I think that clears that up...........many thanks off to do some haggling

 

Removed - duff info.

 

Edited September 11, 2017 by AliMcLeod

[Plumbersmateuk]

2 hours ago, AliMcLeod said:

Assuming he zero VATs your invoice, he would then not own anything to HMRC

The way I have interpretted it if he puts an invoice in E.G for £2000 at zero this would go on his vat return as income and he would pay (presuming say Agricultural services is 11%)

so he would be out of pocket by £220.

Reading the web site if you join the VAT Flat Rate Scheme there is not the provision for exempt invoices.

This is my take on it feel free to correct me.

I hope I'm wrong.

[AliMcLeod]

17 minutes ago, Plumbersmateuk said:

The way I have interpretted it if he puts an invoice in E.G for £2000 at zero this would go on his vat return as income and he would pay (presuming say Agricultural services is 11%)

so he would be out of pocket by £220.

Reading the web site if you join the VAT Flat Rate Scheme there is not the provision for exempt invoices.

This is my take on it feel free to correct me.

I hope I'm wrong.

 

Actually, after re-reading the rules, I agree. I hadn't realised that zero-rated services were included in the flat rate turnover, so he would still be charged (presumable) 11% VAT.

 

Section 6.2

 

https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses/vat-notice-733-flat-rate-scheme-for-small-businesses#section6

 

I'll edit my post above to correct it.

 

Edited September 11, 2017 by AliMcLeod

[Plumbersmateuk]

4 minutes ago, AliMcLeod said:

Actually, after re-reading the rules, I agree. I hadn't realised that zero-rated services were included in the flat rate turnover, so he would still be charged (presumable) 11% VAT.

Shame I'm not wrong, still gonna try a negotiate with him and thanks for the input.

I am surprised this hasn't come up before. Perhaps it has and I haven't used the right search criteria

[AliMcLeod]

10 minutes ago, Plumbersmateuk said:

Shame I'm not wrong, still gonna try a negotiate with him and thanks for the input.

I am surprised this hasn't come up before. Perhaps it has and I haven't used the right search criteria

 

The starting point for your negotiation could be that he'll have been making a "profit" using the flat rate scheme.

 

So, if his hourly rate is (for example) £100 ex-vat, he'd (in a standard VAT-rated engagement) be charging £120 to customers, then paying £13.20 (assuming 11% - you'd need to check) to the VAT man, meaning a net hourly rate of £106.80.

 

If you get him to zero-rate his invoice at £112.36, he'll owe the taxman £12.36 and get his net £100 per hour. He may well see that as a £6.80 discount on his hourly rate, however.