To pay VAT or to not pay VAT

[SarahG]

Sorry if this is covered elsewhere, but more looking for what other people do in same situation.

 

Our builder is doing majority of work and all parts/labour is zero rated. So all fine.

 

We have bought our own kitchen units (again fine as we can claim back the VAT here), but our kitchen fitter wants to charge VAT to install.

 

Then we are using another company to supply and install our log burner. They also want to charge is VAT.

 

So my question is, as far as I understand I cannot claim back the VAT for either of the install costs here, so even though we should be exempt I will have to pay it. Unless I can persuade them not to charge me VAT in the first place? So far I have not had any luck here, they say we will provide invoice showing VAT breakdown which doesn't really help if I can't claim it back anyway. 

[ProDave]

18 minutes ago, SarahG said:

We have bought our own kitchen units (again fine as we can claim back the VAT here), but our kitchen fitter wants to charge VAT to install.

 

Then we are using another company to supply and install our log burner. They also want to charge is VAT.

 

They are both wrong to charge you VAT on a new build.  If necessary show them the PP to prove it is a new build.  If they won't back down choose someone else.  You will not be able to claim it back.

[SarahG]

24 minutes ago, ProDave said:

They are both wrong to charge you VAT on a new build.  If necessary show them the PP to prove it is a new build.  If they won't back down choose someone else.  You will not be able to claim it back.

Yes, that is what I thought. Thanks for confirming.

 

 

Email sent with planning permission and CIL relief document, so will see what they say..

[Alan Ambrose]

+1 Ask them to check with their accountant. They usually have one for income tax and VAT returns.

[nod]

I’d think twice about your fitter 

He’s either very inexperienced Or pocketing the vat

A quick call to his accountant would put him straight 

If he has one 

You can always get the log burner company to split the invoice and show the labour as zero and claim the vat back on the fire 

They should zero rate all of it But a lot of small businesses won’t 

[saveasteading]

I'm sympathetic to these installers. Presumably they haven't come across this process.

It worries people that having heard of it, that they might lose out.

 

As a contractor you pay vat on materials,  plant  and subcontractors. You reclaim it only quarterly.  

In vatable work the client  is covering this cashflow.

But in non vatable work it can hit cashflow hard, and is a free loan to the government.

 

The contractor has to cover it somehow.

Is a vat registered business obliged to take the work? I dont think so.

 

More discussion may resolve this but I suggest don't be angry or critical.

[torre]

Point them towards VAT Notice 708 which covers this. Specifically section 3 about zero rating, then section 14 about building a dwelling which means that consequently they don't need to hold any certificate before zero rating.

 

It's reasonable for them to request a copy of your planning permission as evidence they can zero rate.

 

I can see why small businesses may struggle to get this right (the first couple of times they encounter it anyway) but that's no reason to expect you to pay 20% extra for something.

If they've already issued an invoice, they may want to give you a credit note (for the 20% they've applied incorrectly) instead of modifying the original invoice, but then you'd still only pay the balance (being the zero rated cost)

[SarahG]

Thanks @torre for the link to the VAT Notice I was looking for something to send to explain the process better.

 

I've not heard back yet, hopefully I have not scared them off! Definitely wasn't angry or critical. Depending on what they say I will suggest splitting the invoice and the other recommendations. I am more than happy to pay VAT assuming I can claim it back at the end.

 

I really don't want to feel like this is a negative process for the installers, I wish it was a bit easier and everyone understood! We have used a couple of other suppliers and had no issues zero rating, but they tend to be bigger companies though.

[saveasteading]

Imagine your contractor adds 20% for overhead and profit. They don't collect any of that until their vat return. Not a comfortable way to run a business.

Timing can help to reduce the 3 month wait.

Or the client buys materials and reclaims at the end of the job.

 

Offering to pay the bills very promptly can overcome this, as does having no retention.  But for this you need utter  confidence in the builder.

 

As perspective....I did a £3M project where the VAT liability was not clear and HM customs wouldn't even make a ruling prestart. Scary. But the same applies at whatever cost to some extent.

[SarahG]

I always make sure any invoice from our builder is paid on the same day, that way he knows he can trust us. We also have a lot of trust in him so it has been a good relationship so far and now he is doing work for two of our friends as well. It is important to me that this is a mutually beneficial relationship.

 

Good news is log burner company are all fine with the zero rate VAT, so will do this when they send us the final invoice after work. So now I can go ahead and get the deposit paid and crack on. Kitchen fitter I will talk to again in a few weeks, but I feel I now understand better how it works and why they may be reluctant to do this. We definitely want to use him so hoping we should be able to find a solution that works for us both. Thanks everyone

[Temp]

Officially they don't need a certificate but sometimes providing one helps convince them to zero rate.