VAT Reclaim From Plumber

[BTC Builder]

I'm starting my build in a few weeks, and the only personnel I don't have on board yet is a plumber. I suspect I'm putting them off because I've told them I want a price for labour only (vat free obviously) and I'll get materials, whatever they want. I've explained that I want to be in complete control of vat return to HMRC and I don't want to be waiting on anyone for receipts or for them to do their vat returns as it's time sensitive. The less points of failure, the better.

 

As the plumbers quite rightly want to spec the ASHP and underfloor heating, they probably can't be bothered with me getting involved in purchasing the materials.

 

I was wondering what approaches others have taken in a self managed build (I'm the builder and will be purchasing everything at trade price) in approaching plumbers and the best way to go about it?

[Jenki]

Any Subcontractors invoices for qualifying items will be zero rated. So I don't understand where the delays will be, they send you an invoice with no VAT - job done.  You don't need to worry about those items, or their VAT returns.

[Conor]

Better to let them supply and fit everything at 0 rated vat.

[Blooda]

Quick summary of how we did it.

 

A variety of methods.

 

Ground Clearance and Foundations - Ground Worker - 0% VAT inc Material

Sub-Structure - Bricks/mortor/etc - Ground worker bought, I paid VAT [claimed back at the end] - Labour to Brickies VAT Free.   

Super Structure - Bricks/mortor/etc - Ground worker bought, [claimed back at the end]- Labour to Brickies VAT Free.

Block and Beam - I bought direct - [VAT claimed back at the end] - Labour to Brickies VAT Free.

Floor Joists - I bought direct - [VAT claimed back at the end] - Labour to Chippy VAT Free

Roof Structure Joists - I bought direct - [VAT claimed back at the end] - Labour to Chippy VAT Free

Roof Covering - Roofer Ordered - I Paid Supplier Direct - [VAT claimed back at the end -  Labour to Roofer VAT Free

Plumbing  - Plumber ordered most things, - I Paid Supplier Direct - [VAT claimed back at the end - I bought some - Labour to plumber VAT Free.

Heat Pump / supply / fitting / plumbing / electrics - I went to MCS supplier [my plumber umbrella'd to] I paid for full install VAT Free. 

Electric's - I set up a trade account at Electrician favoured supplier, he ordered and collected on my account [VAT Claimed at end] - I ordered pretty stuff [Sockets lights etc] [VAT Claimed back at the end.] - Labour to Electrician VAT Free.

Plasterer - Plasterer told me what I needed to Order - I ordered from his Supplier and Paid [under his account] - Claimed VAT Back at end - Labour to plasterer VAT Free.

Kitchen cabinets- Ordered at Howden's through fitter's account - I paid [VAT Claimed back at end] - Labour to fitter VAT Free.

 

We ended up with around 500 receipts / invoices in the 4 files that was the VAT Claim]

 

In  the covering letter to HMRC, any receipts invoices that had Tradesman's name on [almost always made sure the postcode was on somewhere.], were highlighted with a note saying, "it was a trade account, I paid, I can supply matching Credit card statements if you need to check].

 

 

[JohnMo]

2 hours ago, BTC Builder said:

As the plumbers quite rightly want to spec the ASHP and underfloor heating, they probably can't be bothered with me getting involved in purchasing the materials

As mentioned above materials installation etc by a trade company are zero rated for vat. You get the bill just the same as anyone would, but everything is zero rated vat. Same is true for labour only. Material only you pay vat and claim back.

 

On our build I did all the plumbing except gas boiler, which I supplied, plumber came and was a time for labour only bill. They had no responsibility except gas safe compliance and initially commissioning boiler.

 

If you want the plumber to 'design' and install, you really need to let them also supply also, then it's their fault if things are not as expected, any other way it's your fault because the stuff you supplied was wrong... Or design yourself and supply and the plumber is just a pair of hands doing labour.

[BTC Builder]

 

5 hours ago, JohnMo said:

As mentioned above materials installation etc by a trade company are zero rated for vat. You get the bill just the same as anyone would, but everything is zero rated vat. Same is true for labour only. Material only you pay vat and claim back.

 

So is it normal for a plumber to buy a heat pump for £10k + vat and then pass it on to the customer for 10k and pay out the 2k vat themselves, to claim it back themselves whenever they do their next return?

 

Am I missing something here? I've had two plumbers round and both seemed very perturbed about the idea of zero vat and were saying things along the lines of "oh well we do vat returns every few months so can sort you out shortly after we've done the work" which doesnt sound right and a bit of an accident waiting to happen. 

[LnP]

7 hours ago, Blooda said:

In  the covering letter to HMRC, any receipts invoices that had Tradesman's name on [almost always made sure the postcode was on somewhere.], were highlighted with a note saying, "it was a trade account, I paid, I can supply matching Credit card statements if you need to check].

I think I recall Andrew Jones (The VATMAN) cautioning against this. IIRC his advice is that the name on the invoice has to link directly to your build.

[JohnMo]

4 hours ago, BTC Builder said:

is it normal for a plumber to buy a heat pump for £10k + vat and then pass it on to the customer for 10k and pay out the 2k vat themselves

What heat pump are they buying that costs £10k for a new build? And yes it is normal for any trades people not to pass vat to yourself. We had materials way in excess of £10k plus vat. If you are paying stupid prices like that get it MCS certified and let them claim £7500 back from the government.

 

No idea what they do about vat returns don't really care. They aren't allowed to pass on vat to yourself under vat rules.

[Alan Ambrose]

>>> They aren't allowed to pass on vat to yourself under vat rules.

 

I can see why they are nervous though - their accountants probably drill into them from day 1 that that they have to charge VAT for everything (if they're VAT registered). What box do they tick in their accounting systems?

 

For example:

 

https://www.gov.uk/charge-reclaim-record-vat/when-not-to-charge-vat

 

... doesn't mention 'selling to self-builders' anywhere.

[Nickfromwales]

2 hours ago, Alan Ambrose said:

. doesn't mention 'selling to self-builders' anywhere.

Why would it, it would state where zero VAT rate is applicable, and when reverse VAT practice is kosher. I do both, no issue. Never have I asked a client (new self / custom builds) to pay any VAT. If the VAT cannot be zero'd at the merchant, I just pay the VAT, I don't charge it to the client, I wait 3 months and get it back....simples. The wait to claim it back is probably an excuse and not a reason for these individuals to deviate from the norm, which stinks that they simply cannot manage their cashflow. For what they're charging they should be all over this like a rash ffs. 🙄

[Blooda]

12 hours ago, LnP said:

I think I recall Andrew Jones (The VATMAN) cautioning against this. IIRC his advice is that the name on the invoice has to link directly to your build.

Cautioning against, yes. 

 

But it can be interpreted that the name has to be on the invoice, and not necessarily, the account holder:-

 

From HRMC:-

 

You must have a VAT invoice for all the eligible goods you claim for.  

The goods must have been supplied to you and we may ask you to prove you have paid for them.

The VAT invoice will need to show:  

-the supplier’s name, address and VAT registration number 
-date of issue
-the quantity and description of the goods 
-your name and address if the value is more than £250 
-the price of each item showing the VAT treatment

 

 

 

I supplied invoices from several suppliers, Including Howdens and Travis Perkins, from tradesman's accounts.  These always had our name and site address on them somewhere, either in the notes, reference or delivery address.  Highlighted these in the covering letter, explaining the supplier was trade only [I did throw a bit of COVID into the wording]  and my tradesman had ordered and I paid, and I could supply credit card statements to validate.

I got paid the claim and they did not want to see credit card statements.

 

I did fail to mention, the tradesmen wanted to stay under the VAT Threshold 🤔

 

 

 

 

[Jenki]

10 hours ago, Alan Ambrose said:

>>> They aren't allowed to pass on vat to yourself under vat rules.

 

I can see why they are nervous though - their accountants probably drill into them from day 1 that that they have to charge VAT for everything (if they're VAT registered). What box do they tick in their accounting systems?

 

For example:

 

https://www.gov.uk/charge-reclaim-record-vat/when-not-to-charge-vat

 

... doesn't mention 'selling to self-builders' anywhere.

I didn't do any new builds when VAT registered, but did a remodel for a person with disabilities.  He gave me a number for VAT exemption, a quick chat with the accountant confirmed I just zero rated the invoice. When I produced the invoice I used 0% for the vat field, similar to the 5% on certain items.

Job done no issues, and yes I had to stand the several hundred quid until the vat reclaim.

In reality this is not an issue, as you have a VAT pot as the majority of the time  you are a tax collector and hand the VAT collected for labour over to HMRC.

[charlieroper]

Given the minefield that this can be we have actually paid for a VAT advisor who has already paid for himself by claiming back incorrect invoices from demolition work. I realise it's another expense that most want to avoid but the downside of getting it wrong is massive so we figured rather get experts on it (they collate all invoices, speak to suppliers and contractors to provide them with reassurance etc). 

[Temp]

If the plumber buys materials they must zero rated them to you same as their labour. So you have no VAT to reclaim.

 

Waiting on receipts from them so you can reclaim the VAT isn't an option HMRC allow on a new build. Only on a conversion where it's 5%.

 

The plumber isn't out of pocket as he reclaims any VAT he pays.

Edited May 15 by Temp

[Temp]

Write the plumber a letter certifying that their work is on a new build. Quote your planning reference number and all your contact details. Use the words "I certify..." Show them VAT 708.

 

[Nickfromwales]

5 hours ago, charlieroper said:

we have actually paid for a VAT advisor

They're actually very good value for money. @Andrew Jones (The VAT Man) will be buttoning some stuff up for me shortly, and he will very likely cover his fees in spotting what bits I have missed / misunderstood, alone. I always like hearing peoples thoughts on "VAT efficiency" too......

[BTC Builder]

Thanks everyone for the help. I guess I need to be more assertive when saying it's 0% vat. I should point out that the guys who have been round were probably only in their mid twenties, new in business and didn't really understand. I don't understand it myself fully, hence why I offered to buy everything myself. 

 

But using my sums earlier, if someone buys £10k + VAT worth of kit and then passes it on to me for £10k, they then have to find the extra £2k VAT in the interim until the claim it back 

 

I guess I need an established tradesmen who's done this before and isn't penny pinching to the point where they can't make up the short term VAT 

[Nickfromwales]

Or you just buy it for them, if you like the guys, and they agree to put their big-boy pants on and suck up the babysitting approach? You deal with VAT, life goes on...

[saveasteading]

10 hours ago, BTC Builder said:

they then have to find the extra £2k VAT in the interim until the claim it back 

That's quite a lot. For non builders, think of your nett salary having another 20% held back.

 

I had a £2M job where we had to 'loan' the vat To the government. It was £80k ish in one quarter and that went on for a year.Then at rebate time you get a phone call questioning it.

[Jenki]

15 hours ago, BTC Builder said:

Thanks everyone for the help. I guess I need to be more assertive when saying it's 0% vat. I should point out that the guys who have been round were probably only in their mid twenties, new in business and didn't really understand. I don't understand it myself fully, hence why I offered to buy everything myself. 

 

But using my sums earlier, if someone buys £10k + VAT worth of kit and then passes it on to me for £10k, they then have to find the extra £2k VAT in the interim until the claim it back 

 

I guess I need an established tradesmen who's done this before and isn't penny pinching to the point where they can't make up the short term VAT 

But your looking at this for one job, he's a plumber doich.ng 10/ 20 jobs a Month. Every invoice he raises he adds 20% vat to his labour, so in this one instance he would have a shortfall say 2k, but on the other say 30 days at say£250/day he will add £60 vat / day so £1800 and any extra for the uplift of supplying materials this sits in the account or a superate Vat account until he pays the HMRC. So no issues. If switched on he would probably get the supplier to zero rate for him. Plus the goods on account won't be paid for for 60 days. It's just how it works. And back to @JohnMo point, which ASHP is £10k

 

[BTC Builder]

56 minutes ago, Jenki said:

But your looking at this for one job, he's a plumber doich.ng 10/ 20 jobs a Month. Every invoice he raises he adds 20% vat to his labour, so in this one instance he would have a shortfall say 2k, but on the other say 30 days at say£250/day he will add £60 vat / day so £1800 and any extra for the uplift of supplying materials this sits in the account or a superate Vat account until he pays the HMRC. So no issues. If switched on he would probably get the supplier to zero rate for him. Plus the goods on account won't be paid for for 60 days. It's just how it works. And back to @JohnMo point, which ASHP is £10k

 

£10k was a number I put in for easy maths, but if someone were to offer me a heat pump, tank and underfloor heating system suitable for 165 sqm for £10k then I'd take their hand off.

[JohnMo]

Just look at the prices yourself

 

New build so heat loss shouldn't be huge so assume a 6kW - about £2500. Cylinder £1000, should come with full safety group and expansion and maybe a 3 way valve. Feet and Flexi hoses for ASHP. Some 28mm pipe either copper or Hep2O.

 

UFH manifold, 16mm UFH pipe and staples and a decent thermostat.

 

That's the full shopping list just about.

 

About £5k should do it.

[BTC Builder]

28 minutes ago, JohnMo said:

Just look at the prices yourself

 

New build so heat loss shouldn't be huge so assume a 6kW - about £2500. Cylinder £1000, should come with full safety group and expansion and maybe a 3 way valve. Feet and Flexi hoses for ASHP. Some 28mm pipe either copper or Hep2O.

 

UFH manifold, 16mm UFH pipe and staples and a decent thermostat.

 

That's the full shopping list just about.

 

About £5k should do it.

 

 

That's perhaps a bit optimistic, especially as I don't want the cheapest, nastiest ashp, and I'll need a 200l cylinder. Having just had a look at screwfix though I was pleasantly surprised by the prices, maybe it will come in under £10k all in.

 

 

[JohnMo]

27 minutes ago, BTC Builder said:

perhaps a bit optimistic, especially as I don't want the cheapest, nastiest ashp

Nothing wrong or cheap and nasty about any of the below. 

 

Look at city plumbing or similar. Panasonic 5kW £2300, 7kW £2800 LG 5kW £2100, Ideal 5kW £2500, Grant 6kW £1900.

 

£10k they have seen you coming and are ripping you off. Simple monobloc is all you need, others on here state that Panasonic are great bits of kit. You can pay an extra £2k for Vaillant if you want, but no idea why people do.

 

Mine cost £1300 vat included, last year, does heating and cooling out the box, is cheaper to run than my gas boiler - what's not to like. My Ideal 210L slimline cylinder was £900 incl vat.

 

[saveasteading]

3 hours ago, Jenki said:

If switched on he would probably get the supplier to zero rate for him

That can't be done. The rest is logical except that would be happening anyway, and he is still the one providing free credit.

Of course we expect plumbers to be very comfortably off these days.  Maybe most are.