Non vat registered builder - materials cost

[Roz]

We're considering using a Non Vat registered builder to get us to watertight shell stage for our barn conversion. The quote he's provided therefore includes 20% Vat on materials and 0% on his labour.

 

I mentioned to him that we're looking into VAT reclaim on materials and we may need to buy them ourselves, which he seemed OK with but mentioned that he gets approximately 20% trade discount from his builders merchants. Is it therefore not worth us buying these items ourselves? Or are we likely to be able to get a similar price if we look around?

 

He suggested the items he can't get from his merchant, eg. septic tank, steel frame, etc, we could purchase ourselves in order to claim back the VAT. 

 

If he was VAT registered, I understand he would charge us 5% on labour so we wouldn't need to reclaim, would he charge us 5% on materials too?

[newhome]

3 minutes ago, Roz said:

If he was VAT registered, I understand he would charge us 5% on labour so we wouldn't need to reclaim, would he charge us 5% on materials too?

 

Yes he would and you could reclaim the 5% for both labour and materials during the reclaim (assuming it's an eligible conversion). It's slightly different to the self build form. 

 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/487887/VAT431C_form_and_notes.pdf

 

 

[Roz]

2 minutes ago, newhome said:

 

Yes he would and you could reclaim the 5% for both labour and materials during the reclaim (assuming it's an eligible conversion). It's slightly different to the self build form. 

 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/487887/VAT431C_form_and_notes.pdf

 

 

Thanks @newhome . The fact that we can reclaim that 5% also is something I hadn't realised until reading your thread and other posts on this forum and elsewhere today. I thought we reclaimed from 20% down to 5% - so that makes a bit of difference! 

 

If we go with him I am just not sure whether it's worth us sourcing e.g. all the timber for the extension ourselves so that we're then able to reclaim the VAT... down to 5% or 0%... so confusing. Because if we already have a 20% discount for him buying them through a trade account, then it might be excess paperwork.

[Sue B]

I would try going to the BM to get a trade discount from them due to the amount of materials you will be purchasing.  Then you can buy the materials yourself and still ge the VAT reclaimed.

[Roz]

1 minute ago, Sue B said:

I would try going to the BM to get a trade discount from them due to the amount of materials you will be purchasing.  Then you can buy the materials yourself and still ge the VAT reclaimed.

That's a good idea Sue, I didn't think that they might do that. 

[newhome]

14 minutes ago, Roz said:

That's a good idea Sue, I didn't think that they might do that. 

 

It’s what we did for our build.

 

I don’t see the benefit of using a non VAT registered builder for this TBH unless he is stacks cheaper. For one thing any discounts available to your proposed builder must surely be available to a VAT registered builder too and then you can get the VAT back on top of that discount. 

 

Worth asking for a couple more quotes and pricing up materials and comparing before you commit in truth. 

 

[Roz]

Just now, newhome said:

 

It’s what we did for our build.

 

I don’t see the benefit of using a non VAT registered builder for this TBH unless he is stacks cheaper. For one thing any discounts available to your proposed builder must surely be available to a VAT registered builder too and then you can get the VAT back on top of that discount. 

 

Worth asking for a couple more quotes and pricing up materials and comparing before you commit in truth. 

 

Thanks newhome. We're having a tricky time getting in full quotes to watertight to be honest. We've had multiple people out to site who haven't bothered to quote despite chasing, and other who talk about coming to site and don't make it. We've had two quotes back that are similar prices in areas, until the VAT rated one adds loads of extra fees for 'professional services' and 'site setup' that he is yet to explain to me. I'll give him some time now we're all back from the festivities, but if I can't get a straight answer about things like this then I'm left feeling like I actually only have one builder so far who is giving me a transparent quote (which is stacks cheaper because of these added fees)! And that's the non VAT registered one. 

 

It took so long to get these quotes through that I've almost stopped chasing others to come to site or provide quotes, as it'll take another 3 weeks to get the quotes in I guess. But then we do have building regs to go through so perhaps we have time to follow some up.

 

 

[lizzie]

@Roz in my experience they all give the story about the discount on their account.....really they like to have the control of purchasing and scheduling and they get perks for how much they spend in a year etc. plus the cashflow advantages.

 

I would go and open an account at a reputable local bm (not jewsons they are generally more expensive than anyone else), you will get a discount from them too plus you then have the advantage of not only vat reclaim but the cash flow which if managed can give you as much ad 60 days free credit.  You can always give builder authority to order on the account and check it off from delivery notes to invoices.

[Roz]

2 minutes ago, lizzie said:

@Roz in my experience they all give the story about the discount on their account.....really they like to have the control of purchasing and scheduling and they get perks for how much they spend in a year etc. plus the cashflow advantages.

 

I would go and open an account at a reputable local bm (not jewsons they are generally more expensive than anyone else), you will get a discount from them too plus you then have the advantage of not only vat reclaim but the cash flow which if managed can give you as much ad 60 days free credit.  You can always give builder authority to order on the account and check it off from delivery notes to invoices.

Hi Lizzie. If we go with the non vat registered builder this seems like a really good idea. Im not sure what you mean about the cash flow and free credit (sorry). But allowing the builder to order on the account is a good idea and would smooth out that process, as long as I checked everything off. 

 

I think I am a bit worried I wouldn't get the same trade discount as they would know I am an individual, but would have to see!

Edited January 6, 2019 by Roz

[Gone West]

7 minutes ago, Roz said:

I think I am a bit worried I wouldn't get the same trade discount as they would know I am an individual, but would have to see!

We set up a self builder account at Jewsons and the manager gave us a list of all their building materials with the discount we would receive for each. It depends very much on the builders merchants in your area and the branch managers. There is a large variation between areas.

[Jeremy Harris]

I did much the same as @PeterStarck, but I went around all the local builders merchant to set up trade accounts with them.  One builders merchant (our local independent) told me that I didn't really want a trade account, as the discount on trade accounts is pretty small.  Instead he offered me a cash account, which was cash (or card) with order and gave on average about 10% to 15% more discount than a standard 30 day credit trade account.

 

Worth noting that trade accounts aren't about getting a discount, they are focussed on allowing tradespeople to buy materials on credit, before they get paid by their customers.  As credit costs money, trade account discounts are generally nowhere near as good as cash account discounts.

 

As it turned out, our local independent BM not only consistently gave me better prices than anyone else (and better prices than any of the tradespeople we used could buy from them for) but they also offered to try to price match, even with prices from the internet.  There was only one product they couldn't price match, and that was pavers for the drive.  I could buy those directly from Simply Paving for less than the price our local BM could buy them in at wholesale.

 

Well worth asking around and letting your local BMs know that you're a self-builder, and want a cash account with the best discount they can offer, and ask if they can price match for bigger orders.

[lizzie]

27 minutes ago, Roz said:

Hi Lizzie. If we go with the non vat registered builder this seems like a really good idea. Im not sure what you mean about the cash flow and free credit (sorry). But allowing the builder to order on the account is a good idea and would smooth out that process, as long as I checked everything off. 

 

I think I am a bit worried I wouldn't get the same trade discount as they would know I am an individual, but would have to see!

What I mean is if you order at the right time of a month and you have a 30 day credit account effectively it can be 2 months until you pay the BM hence you have the money in your account not theirs 2 months longer and that is really useful for cash flow as you get into big expenditure as build progresses. If using your builders account he would have that benefit not you as undoubtedly there would be a gap between when you paid him and he paid bm.

 

our independent bm gave us good discounts easily matching ‘trade’ discounts and would price match. I couldnt get better with a cash account. I think you have to go and talk to them and see what you can negotiate.

Edited January 6, 2019 by lizzie

[newhome]

4 minutes ago, lizzie said:

What I mean is if you order at the right time of a month and you have a 30 day credit account effectively it can be 2 months until you pay the BM hence you have the money in your account not theirs 2 months longer and that is really useful for cash flow as you get into big expenditure as build progresses.

 

Yep, and similarly for any purchases bought on a credit card. Time it right and it can be circa 2 months before you have to pay it off the card interest free. 

 

[Roz]

Thanks everyone - this is super helpful. I know of a local independent builders merchant so I will call them and ask about discounts for both trade and cash accounts - thanks for sharing all of your experience, so helpful!