VAT on builders purchases

[Mark A]

Trying to finalise my budgets and cash flow for my new build and not clear on VAT.

I have read as much as I can and mostly clear on what can and can't be claimed. However not clear how the process work with a contractor.

For example these are my thoughts but feel free to correct.

 

Builder 1 is not registered for VAT if he purchases bricks etc. he pays inclusive of VAT, as he isn't VAT registered he cant claim the VAT. The alternative is for me to pay directly for the materials then claim back VAT, otherwise I pay the VAT to the builder and loose it.

 

Builder 2 is registered for VAT if he purchases bricks etc. he pays the VAT then claims it back himself or can ask me to pay directly and claim back myself.

 

Ideally I want to pay out as little VAT as possible during the build then have to claim from HMRC but maybe there is no choice . Maybe I am missing something obvious. Any help appreciated. - thanks.

 

[IanR]

Welcome,

 

As long as you are building a new build for yourself or family member to live in then you are almost correct. Builder 2 will invoice you inclusive of VAT at 0%, so you will not incur any VAT on materials (or labour) he uses on your build.

 

 

Edited February 8, 2018 by IanR

[Mark A]

Yes sorry I should have mentioned its a new build for us to move into when complete, thanks

[Bitpipe]

Golden rule is you cannot reclaim any VAT charged to you by contractors (even if in error). In general, only services directly involved in the build itself are allowed (from demo to landscaping) but not professional services (survey, architect, SE ect..) or hire fees of plant or equipment.

 

Some contractors are OK with this, some struggle with the concept and need educating. Worst case, get them to charge you for labour only and you provide all materials.

 

You can reclaim for materials (check HMRC for what is and isn't allowed) consumed in the process of the build that you buy, invoiced to you and delivered to your site or collected by you.

[Temp]

1 hour ago, Mark A said:

Builder 1 is not registered for VAT if he purchases bricks etc. he pays inclusive of VAT, as he isn't VAT registered he cant claim the VAT. The alternative is for me to pay directly for the materials then claim back VAT, otherwise I pay the VAT to the builder and loose it.

 

Builder 2 is registered for VAT if he purchases bricks etc. he pays the VAT then claims it back himself or can ask me to pay directly and claim back myself.

 

Ideally I want to pay out as little VAT as possible during the build then have to claim from HMRC but maybe there is no choice . Maybe I am missing something obvious. Any help appreciated. - thanks.

 

Builder 1: The only option is for you to buy the materials in your name and reclaim the VAT yourself. If the builder purchases anything in his name neither of you can reclaim the VAT.

 

Builder 2: Both his labour and the materials he supplies should be zero rated to you. So there is nothing for you to reclaim. The builder will reclaim any VAT he has paid. 

 

Regarding your objective: Best option is ONLY to use VAT registered trades (Builder 2).

 

If you buy anything yourself (perhaps second fix items) then reclaiming the VAT isn't very difficult.

Edited February 8, 2018 by Temp

[Mark A]

Thanks for all the advice really helpful.