VAT on supply and fit - Windows

[Redoctober]

Our windows arrive next week and the window manufacturer is also installing them for us. 

The final payment is therefore due soon after completion.

I have been told by them that the VAT is payable up front and I will be able to reclaim at a later date. 

However, I have also heard that if I submit an invoice for such a claim it will be rejected as it will be considered to be a wrongly charged VAT invoice. That is, the VAT shouldn't have been charged in the first place and therefore can't be reclaimed as a result!

What is the collective's view on this?

Thanks.

 

Edited June 13, 2018 by jack
Merged duplicate thread

[ProDave]

No Wrong. Supply AND FIT should be charged to you at 0% VAT. You are not able to reclaim VAT paid on labour for a new build as all labour should be zero rated, and as the windows are being fitted they should be zero rated.

 

Someone will post the actual wording from the VAT people which you can show to the supplier.

[divorcingjack]

For supply only, you pay the VAT and reclaim it. 

 

If the invoice details supply AND fit, the whole thing must be zero rated at source and the supplier sorts it as part of their VAT return. If you pay the VAT at this point, you will not be able to reclaim it and arguing with HMRC is a pointless exercise. 

 

Convincing your supplier of this may not be an easy task - I found the best approach was to direct them to the relevant VAT notice and just flat out refuse to pay until the VAT was removed. Proved effective! 

 

[vivienz]

Definitely zero rated for supply and fit.  I'm having my glazing supplied and fitted by the same supplier.  I gave them a copy of my PP to confirm that it was a new build and that was it.

 

It's a big old chunk of cash on the glazing - I wouldn't want to have to argue over it at the end.

[MikeGrahamT21]

Fit them yourselves and save a fortune!

[lizzie]

Don't pay the VAT you won't be able to reclaim it.  Give them the self certificate if they stick, its pretty worthless but in my experience does the trick as it gives them a comfort.

[AliG]

As said don't pay this, you won't be able to claim it back.

 

I had to have quite robust discussions with some suppliers to get them to zero rate things when it was supply and fit. They all did in the end.

 

I had to sometimes send them the VAT notice. The rules are mostly in Section 3 of this.

 

https://www.gov.uk/government/publications/vat-notice-708-buildings-and-construction/vat-notice-708-buildings-and-construction

[Redoctober]

Many thanks to @ProDave @divorcingjack @lizzie @AliG and @vivienz Message received and understood. Very grateful to you all thanks. As for @MikeGrahamT21, nice idea but sadly out of my scope.

[Temp]

+1 to the above.

 

VAT 708 can be very confusing in places. If necessary refer them to...

 

The table in Section 2.1 which says that work on a new qualifying dwelling (eg fitting the windows to a new dwelling) should be zero rated.

 

and Section 2.2 on building materials. In particular the bit that says...

 

Builders, however, charge VAT on ‘building materials’ that they supply and incorporate in a building (or its site)

at the same rate as for their work. Therefore, if their work is zero-rated or reduced-rated, then so are the ‘building materials’.

 

So BOTH their work in fitting the windows and the supply of the windows MUST be zero rated. 

 

Note: It would be different if they were just supplying the windows and not fitting them. In that case they should charge you VAT and you can reclaim it. It's the fact that they are doing both that means it is zero rated to you.

 

[Big Neil]

If a company are doing the supplying and fitting (be it of windows or whatever) but bill those items separately, can the VAT be claimed back on the supply end of things, as distinct from if your contract with them was a cumulative price of 'supply and fit'?

[HerbJ]

On 13/06/2018 at 16:23, Temp said:

So BOTH their work in fitting the windows and the supply of the windows MUST be zero rated. 

 

 It is against the law to charge VAT on a VALID new build that is zero rated.   So, a contractor cannot refuse to zero rate supply and labour invoices on a valid new build. They must  ZERO rate and cannot charge VAT.

 

I was told by HMRC that it is possible to recover incorrectly charged  VAT by taking the contractor to court and claiming the incorrectly applied VAT, as determined by the relevant legislation., .  We used this "veiled threat" using words provided by HMRC in their rejection of two invoices with supply and  labour content, when they responded to our VAT Claim.. We recovered the VAT, on the supply and labour, without resorting to the court.

 

See Reason 1 on page 2 of the letter we received from HMRC - attached. These are the words  we used in letters to contractors who had incorrectly (and illegally) charged VAT, despite being given the valid support documents.  

 

So, it is possible to recover illegally charged VAT, though it may not be easy if the contractor plays difficult and this is likely to happen with a smaller contractor., usually because their accountants do not know the legislation and don't want to deal properly with HMRC on their VAT returns.  We were lucky, but we were silly to get into this situation  and it prudent to sort it out before paying any VAT!!

 

HMRC will always reject a VAT claim with any  labour content.  

HMRC Letter for BH.pdf

Edited August 22, 2018 by HerbJ

[Ed Davies]

I had two invoices recently which incorrectly charged VAT.

 

One was for scaffolding hire where the hire part should have VAT charged but the labour part for erection and dismantling shouldn't. I discussed this quite carefully with the boss when he priced the site but still it all came through with standard 20%.

 

The other was getting a chap from local builder round with a digger to lift my rafters. In that case there shouldn't have been any VAT at all.

 

In both cases I paid the non-VAT component of the invoice promptly with a note saying what was up. The scaffolder should really have issued me with another invoice splitting out the labour and hire (I gave him a worked example of the sort of arithmetic which could have been used so the result would come out to exactly what he'd originally quoted) in which case I'd have happily paid the VAT on the hire. I haven't heard anything more from either. Shrug.

 

I then got another builder in to supply and fit sarking boards, etc. I reminded him in an email about zero-VAT: “yes, we know“ like I was teaching egg sucking. You can't win.

[newhome]

1 hour ago, Big Neil said:

If a company are doing the supplying and fitting (be it of windows or whatever) but bill those items separately, can the VAT be claimed back on the supply end of things, as distinct from if your contract with them was a cumulative price of 'supply and fit'?

 

If it was 2 separate invoices and the windows were ordered first and the fitting agreed separately then in theory you could. I imagine they aren’t supposed to if it was all agreed at the same time but if your question solely relates to the reclaim then HMRC aren’t able to ascertain from a completely separate supply invoice that the fitting was done by the same company unless the invoice mentioned this. The question is why would you want to do this however as you will be paying the vat up front when you don’t need to and will need to wait to reclaim it. 

[HerbJ]

2 minutes ago, Ed Davies said:

 

In both cases I paid the non-VAT component of the invoice promptly with a note saying what was up. The scaffolder should really have issued me with another invoice splitting out the labour and hire (I gave him a worked example of the sort of arithmetic which could have been used so the result would come out to exactly what he'd originally quoted) in which case I'd have happily paid the VAT on the hire. I haven't heard anything more from either.

 

This is really good advice and the way to proceed for anyone facing this situation.

[newhome]

1 minute ago, HerbJ said:

 

This is really good advice and the way to proceed for anyone facing this situation.

 

I did this too with the company that did the screeding as despite me telling him it should be zero rated the invoice came through showing standard rate vat. He wasn’t happy but said he’d come back to me if HMRC had a problem. Never heard from him again. 

[Big Neil]

Am I correct in thinking, in the broadest sense, that The VAT reclaim can be for any material used in the build which is considered a permanent and essential part of the buildings operation? So obviously bricks blocks etc are fine, fitted kitchen ditto, boiler yes. However light bulbs no, fridge or freezer even if integrated are a no.

 

2 hours ago, newhome said:

The question is why would you want to do this however as you will be paying the vat up front when you don’t need to and will need to wait to reclaim it.

 And briefly to answer this, my thoughts just went to if you had the cash to cover a cost including VAT and wanted a more visceral spike in available funds after completion.

 

....and sorry if i've hi-jacked anything at all, i'm not normally a very forum sort of person - so i'm a little down on the relevant etiquette

Edited August 22, 2018 by Big Neil
addition

[newhome]

1 hour ago, Big Neil said:

Am I correct in thinking, in the broadest sense, that The VAT reclaim can be for any material used in the build which is considered a permanent and essential part of the buildings operation? So obviously bricks blocks etc are fine, fitted kitchen ditto, boiler yes. However light bulbs no, fridge or freezer even if integrated are a no.

 

Yes but it’s a bit more complex / quirky than that, so fitted kitchens yes, integrated appliances no, apart from a cooker hood. You can claim for an aga that contributes to heating but not one that doesn’t. Hard floors yes, carpets no.

 

VAT on trades if they bring their own machinery even if it’s hired, as in machinery with operator can be zero rated, but hire equipment on its own, no. Scaffolding erection costs (and dismantling) zero rated, but the hire element, no. Etc etc. Essentially any vat on labour (or full supply and fit) CANNOT be reclaimed. It has to be zero rated at source if eligible. 

 

Suggest you read the HMRC guide and claim form end to end as you really need to understand it at the start of the build not at the time you need to claim or you can end up losing out potentially. 

 

HMRC Self Build rules

 

 

1 hour ago, Big Neil said:

And briefly to answer this, my thoughts just went to if you had the cash to cover a cost including VAT and wanted a more visceral spike in available funds after completion.

 

 

Well you could do that I guess but surely your own money is better in your own pocket / bank account than sitting with HMRC? You do risk falling foul of process and HMRC refusing your claim. That’s not likely if you have ticked all the boxes but your question above leads me to believe that you haven’t read the HMRC claim process from start to finish yet and believe me they would be delighted to refuse your claim if there are any anomalies at all. I would also suggest that windows are quite early on in the self build journey and you may be glad of that cash later on (HMRC took 20 weeks to pay my reclaim from submission). 

Edited August 22, 2018 by newhome
Clarification of labour costs being zero rated

[newhome]

PS - no hijack, fire away. The mods only get their knickers in a twist if you put something in the wrong forum ?. Even then it’s easy to move ?

[HerbJ]

35 minutes ago, Big Neil said:

Am I correct in thinking, in the broadest sense, that The VAT reclaim can be for any material used in the build which is considered a permanent and essential part of the buildings operation? So obviously bricks blocks etc are fine, fitted kitchen ditto, boiler yes. However light bulbs no, fridge or freezer even if integrated are a no.

 

In general terms this is correct. More specific guidance is available On the HMRC  website and in VAT/Cost threads on BH.

35 minutes ago, Big Neil said:

my thoughts just went to if you had the cash to cover a cost including VAT and wanted a more visceral spike in available funds after completion.

 

Why would you want to pay out VAT on materials and then wait months/years to reclaim it from HMRC, exposing yourself to the vagaries of HMRC?  It's all about cash flow and this money will be available to you for other areas of your build  - immediately. Why "lend" money to contractors and HMRC to aid their cash flow, when it is exposed to a  risk of not getting it back ( see some of the blogs on this subject) and you are receiving no interest on it but maybe paying interest to borrow cash to continue building?

Edited August 22, 2018 by HerbJ

[Big Neil]

7 minutes ago, newhome said:

leads me to believe that you haven’t read the HMRC claim process from start to finish yet

not yet, but will and thanks for the link

[newhome]

6 minutes ago, Big Neil said:

not yet, but will and thanks for the link

 

There are also a bunch of things that aren’t covered in the HMRC form where people have had success in reclaiming the vat. Boiling water taps for example. If in doubt have a browse of the topics in this forum and if you don’t see what you need start a new thread and ask. There is never a dumb question here. 

[Ed Davies]

1 hour ago, Big Neil said:

Am I correct in thinking, in the broadest sense, that The VAT reclaim can be for …

 

1 hour ago, newhome said:

Scaffolding erection costs (and dismantling) yes,

 

AIUI you can't reclaim for labour (like scaffolding erection/dismantling) - it has to be zero rated at the time of invoice.

[newhome]

Just now, Ed Davies said:

 

 

AIUI you can't reclaim for labour (like scaffolding erection/dismantling) - it has to be zero rated at the time of invoice.

 

Yes apologies I meant that labour costs could be zero rated but my wording was poor. 

 

I will amend so as not to confuse! 

[Temp]

I had to get a water main diverted to build our house. I got a quote from the water co but it included VAT. It took ages to get them to agree they should zero rate it. Even then they said they could only do so because I was connecting to the diverted part. This is nonsense because I couldn't built without diverting the main so it comes under works that "enable a house to be constructed" (along side things like demolition).

 

Any way point is I'm glad I got it sorted and got a new quote before I agreed to them doing the work. I can just imagine them sending final demands for non payment if I agreed to their quote inc VAT but only paid ex VAT.