VAT - 5% for labour and materials?

[Roz]

So I asked for our tilers to issue an invoice at 5%, due to tiling a barn conversion, which they said they were happy to do. However, they seem to have charged the materials at 20% and labour at 5%. 

 

Before I embarrass myself when replying to them, can anyone confirm I am right in thinking BOTH materials AND labour should be 5%?

[newhome]

Yes both labour and materials should be 5%. You can claim the 5% back if your conversion qualifies for a reclaim under the DIY Housebuilders scheme. 

 

[Roz]

3 minutes ago, newhome said:

Yes both labour and materials should be 5%. You can claim the 5% back if your conversion qualifies for a reclaim under the DIY Housebuilders scheme. 

 

Thanks! This is what I thought. I'll email them. 

[newhome]

From the ‘renovation / conversion’ claim form: 

 

Eligible building materials that a business both supplies and installs follow the same VAT liability as the service. This means that if the service is reduced-rated then the building materials will be too.

The Scheme will only refund the correct amount of VAT (that is the VAT that was properly chargeable). If you have been charged VAT at the wrong rate (for example, because VAT was shown as standard-rated, rather than reduced-rated) your claim will be rejected.

If the builder or contractor has charged the wrong rate of VAT on their services and materials that they installed, they should correct the liability. You will need to ask them to provide you with an invoice showing the VAT that has been correctly charged. But do not leave it too late. They have a limited amount of time to correct their VAT account with us, and are likely to refuse to make a correction if it is out of time. If you re-present the claim with an invoice showing the correct rate of VAT, we will make a refund to the extent that other aspects of the claim are satisfactory.

[newhome]

This is from VAT Notice 708 that the builders should be more familiar with:

 

11.2 Goods ‘incorporated’ by a builder

 

If you are a builder, the rate of VAT you charge for your work normally determines the rate of VAT you charge on any goods you ‘incorporate’ in the building (or its site) - see paragraph 13.3 - whilst carrying out that work. So, if your work is zero-rated or reduced-rated, then so are the goods.

 

https://www.gov.uk/government/publications/vat-notice-708-buildings-and-construction/vat-notice-708-buildings-and-construction#reduced-rating-the-renovation-or-alteration-of-empty-residential-premises

 

 

[Roz]

2 minutes ago, newhome said:

From the ‘renovation / conversion’ claim form: 

 

Eligible building materials that a business both supplies and installs follow the same VAT liability as the service. This means that if the service is reduced-rated then the building materials will be too.

The Scheme will only refund the correct amount of VAT (that is the VAT that was properly chargeable). If you have been charged VAT at the wrong rate (for example, because VAT was shown as standard-rated, rather than reduced-rated) your claim will be rejected.

If the builder or contractor has charged the wrong rate of VAT on their services and materials that they installed, they should correct the liability. You will need to ask them to provide you with an invoice showing the VAT that has been correctly charged. But do not leave it too late. They have a limited amount of time to correct their VAT account with us, and are likely to refuse to make a correction if it is out of time. If you re-present the claim with an invoice showing the correct rate of VAT, we will make a refund to the extent that other aspects of the claim are satisfactory.

Thanks so much!

 

As I'm on the case of getting them to re-invoice I should check that everything correct is on the invoice - this is my first one. It's got: 

 

Their VAT reg number

Their address

Their company name

Amounts shown as gross totals (no VAT break down - should it be?)

 

I'm asking for my invoice address to be added. 

 

Anything jump out as missing?

 

 

[newhome]

19 minutes ago, Roz said:

As I'm on the case of getting them to re-invoice I should check that everything correct is on the invoice - this is my first one. It's got: 

 

Their VAT reg number

Their address

Their company name

Amounts shown as gross totals (no VAT break down - should it be?)

 

That seems ok but ensure that your name is on the invoice. The address they invoice doesn’t matter to a degree (I had 3 addresses during the build). 

 

Showing the VAT separately is easier to deal with on the claim form in section D but if it’s not there are separate sections for standard rated (E) and reduced (F). You just have to work the figure out. Most invoices you receive will likely show the vat separately. I only had a handful where it wasn’t separated out.  

[nod]

I’m framing and plastering a mil at the moment 

5% vat 

20% on the materials 

To write off 15% would be a large sum by the time the job has finished

Your tiler would find it very difficult to claim back the vat at full rate if he has only charged 5%

 

Ive been vat registered for over 35 years and still get caught out 

Back in the day A call to your local tax office would make things clearer 

Now you just get a call centre 

 

[Roz]

3 minutes ago, nod said:

I’m framing and plastering a mil at the moment 

5% vat 

20% on the materials 

To write off 15% would be a large sum by the time the job has finished

Your tiler would find it very difficult to claim back the vat at full rate if he has only charged 5%

 

Ive been vat registered for over 35 years and still get caught out 

Back in the day A call to your local tax office would make things clearer 

Now you just get a call centre 

 

I don't understand sorry, so I shouldn't expect it to be a given that the materials are 5%? 

 

In which case I'd be better off  buying them myself I guess if they won't do it.

[Roz]

4 minutes ago, newhome said:

 

That seems ok but ensure that your name is on the invoice. The address they invoice doesn’t matter to a degree (I had 3 addresses during the build). 

 

Showing the VAT separately is easier to deal with on the claim form in section D but if it’s not there are separate sections for standard rated (E) and reduced (F). You just have to work the figure out. Most invoices you receive will likely show the vat separately. I only had a handful where it wasn’t separated out.  

Thanks! I'm sure this is fine by I go by 'Roz' even though my passport is 'Rosalind'... does it matter if they're all the same to 'Roz"?

[nod]

8 minutes ago, Roz said:

I don't understand sorry, so I shouldn't expect it to be a given that the materials are 5%? 

 

In which case I'd be better off  buying them myself I guess if they won't do it.

I do mainly commercial tiling 

The odd time I’m asked by a private individual Can you knock me the vat off Most don’t realise I’ve already paid vet on the tiles 

 

It May be better you supplying the tiles But ask your tiler if he would pass some of his discount on also 

 

[newhome]

38 minutes ago, nod said:

I do mainly commercial tiling 

The odd time I’m asked by a private individual Can you knock me the vat off Most don’t realise I’ve already paid vet on the tiles 

 

Surely you just adjust it on your VAT return? 

 

And a private individual asking you to knock the vat off is against the rules whereas anyone with a self build or eligible renovation is actually following HRMC’s rules so you can legitimately invoice them with no or reduced vat and declare that to HMRC. 

[newhome]

14 minutes ago, Roz said:

Thanks! I'm sure this is fine by I go by 'Roz' even though my passport is 'Rosalind'... does it matter if they're all the same to 'Roz"?

 

Just ensure that your surname is on there I reckon. 

[nod]

1 hour ago, newhome said:

 

Surely you just adjust it on your VAT return? 

 

And a private individual asking you to knock the vat off is against the rules whereas anyone with a self build or eligible renovation is actually following HRMC’s rules so you can legitimately invoice them with no or reduced vat and declare that to HMRC. 

Yep

 

That why I don’t bother with private work

Vat first question How much for cash 

No cash jobs Everything goes directly into the bank 

After thirty days Ish ?

[Oz07]

Vat registered we get everything ex vat really  @nod then we collect vat from customer if applicable. Vat is just a cash flow exercise

[nod]

1 hour ago, Oz07 said:

Vat registered we get everything ex vat really  @nod then we collect vat from customer if applicable. Vat is just a cash flow exercise

To true We do exactly the same 

 

[newhome]

1 hour ago, Oz07 said:

 Vat is just a cash flow exercise

 

Yes and I get why some don’t want to be bothered with reduced or no VAT jobs as they do have to pay the VAT upfront before it’s recovered. It’s the heating trades you should feel sorry for. Many of their installations will be at 5% VAT even for existing houses but they will have to pay standard VAT upfront. 

 

I think the moral of the story is to ensure that both the customer and trade are very aware of expectations in relation to VAT. Putting it in writing would help, even just sending a confirmation email. I found that some trades didn’t want to be bothered by zero rating so I didn’t use them or supplied the materials myself. The difficulty for those doing an ‘empty for 2 years’ renovation is that there is no reclaim scheme (as opposed to ‘empty for 10 years’ properties that are eligible for a reclaim) so unless the trade supplies materials at 5% they have to pay standard VAT. 

 

The other way to approach it is to ask the trade to provide 2 invoices; one that is for the materials as supply only, then another one as fit only. That’s an easy solution for someone building a new house as the fit invoice will be zero rated and won’t go to HMRC but it might be tricky for those doing renovations as both invoices will go to HMRC as part of the reclaim. I guess the answer is that you decided to buy the tiles first and only engaged the tiler to fit them later. But tenuous though and not really in the rules. 

[makie]

58 minutes ago, newhome said:

 

Yes and I get why some don’t want to be bothered with reduced or no VAT jobs as they do have to pay the VAT upfront before it’s recovered. It’s the heating trades you should feel sorry for. Many of their installations will be at 5% VAT even for existing houses but they will have to pay standard VAT upfront. 

 

I think the moral of the story is to ensure that both the customer and trade are very aware of expectations in relation to VAT. Putting it in writing would help, even just sending a confirmation email. I found that some trades didn’t want to be bothered by zero rating so I didn’t use them or supplied the materials myself. The difficulty for those doing an ‘empty for 2 years’ renovation is that there is no reclaim scheme (as opposed to ‘empty for 10 years’ properties that are eligible for a reclaim) so unless the trade supplies materials at 5% they have to pay standard VAT. 

 

The other way to approach it is to ask the trade to provide 2 invoices; one that is for the materials as supply only, then another one as fit only. That’s an easy solution for someone building a new house as the fit invoice will be zero rated and won’t go to HMRC but it might be tricky for those doing renovations as both invoices will go to HMRC as part of the reclaim. I guess the answer is that you decided to buy the tiles first and only engaged the tiler to fit them later. But tenuous though and not really in the rules. 

 

When my old man had a meeting with one of the VAT agents they suggested we just add the VAT on to the total amount due and not tell them that there is VAT added on.

[Oz07]

1 hour ago, newhome said:

 

Yes and I get why some don’t want to be bothered with reduced or no VAT jobs as they do have to pay the VAT upfront before it’s recovered. It’s the heating trades you should feel sorry for. Many of their installations will be at 5% VAT even for existing houses but they will have to pay standard VAT upfront. 

 

I think the moral of the story is to ensure that both the customer and trade are very aware of expectations in relation to VAT. Putting it in writing would help, even just sending a confirmation email. I found that some trades didn’t want to be bothered by zero rating so I didn’t use them or supplied the materials myself. The difficulty for those doing an ‘empty for 2 years’ renovation is that there is no reclaim scheme (as opposed to ‘empty for 10 years’ properties that are eligible for a reclaim) so unless the trade supplies materials at 5% they have to pay standard VAT. 

 

The other way to approach it is to ask the trade to provide 2 invoices; one that is for the materials as supply only, then another one as fit only. That’s an easy solution for someone building a new house as the fit invoice will be zero rated and won’t go to HMRC but it might be tricky for those doing renovations as both invoices will go to HMRC as part of the reclaim. I guess the answer is that you decided to buy the tiles first and only engaged the tiler to fit them later. But tenuous though and not really in the rules. 

Is it up to contractor to verify householders claim that property has been vacant for 2 years? It's not a reclaim scheme for householder is it

[newhome]

31 minutes ago, Oz07 said:

Is it up to contractor to verify householders claim that property has been vacant for 2 years? It's not a reclaim scheme for householder is it

 

Yes it’s up to the contractor. It’s in VAT Notice 708. There is no reclaim scheme for ‘unoccupied for 2 years’ properties so they can only get the reduced rate directly from a contractor. 

 

8.3 Has the premises been lived in recently?

8.3.1 How does the two year rule work?

You can only reduced-rate the renovation or alteration if, in the 2 years immediately before renovation works start, the qualifying residential premises has not been lived in.

If the premises is a building (or part of a building) which, when last lived in, was 1 of a number of buildings on the same site used together as a unit for a relevant residential purpose, then none of the buildings making up the original unit must have been lived in during the 2 years immediately before your work starts. So you cannot, for example, reduced-rate the renovation or alteration of a dormant building within the grounds of an operational home or institution.

8.3.2 How do I know if the premises has been unoccupied for two years?

If you reduced-rated your supply, you may be required to show that the building has not been lived in during the 2 years immediately before you start your work. Proof of such can be obtained from Electoral Roll and Council Tax records, utilities companies, Empty Property Officers in local authorities, or any other source that can be considered reliable.

If you hold a letter from an Empty Property Officer certifying that the property has not been lived in for two years, you do not need any other evidence. If an Empty Property Officer is unsure about when a property was last lived in he should write with his best estimate. We may then call for other supporting evidence.

[Temp]

If you have a trade that doesn't want to zero or reduce rate materials to you (as they should), then then your only option is to buy the materials yourself paying 20% and reclaim it.