A few months ago I paid a builder to construct a small office but there were a few things wrong and I asked him to return and remedy the work. He refused and I got someone else in to make repairs and I paid him directly. I intend to send his bill to the original builder and ask for payment.

I am registered for VAT but neither the builder nor the repair chap are registered. So should I add VAT to the repair bill and send this new amount to the original builder? On the other hand I haven’t actually added any “value” to the supply so may be I should just send the repair bill as is?

There is bound to be a dispute so I want to get off on the right foot.

Thanks, David

 

If you are merely wanting to be reimbursed, you would be best sending him the other builders bill, keeping a copy for yourself, obviously.
But if you are going to be entering it as a cost and sending one of your invoices to the original builder, you will need to add vat.
Personally, I would keep the vat out of it. Good luck

 

Thanks Lee, I concur. david

 

Ask your accountant.

 

He's been sacked

d

 

Put VAT on it and you have zero chance of getting reimbursed by builder number 1, as he cannot claim it back and he has shown he is not inclined to accept any responsibility as it is.

I have an arrangement with one customer as part of a contract whereby when working for him I am paid an agreed subsistence (food allowance) depending on hours worked in a day. I put VAT on everything else I bill to him but not on this subsistence or any hotel charges incurred; as you said, there is no value added as these costs are not incurred as part of a 'service' provided.
I ran this past my accountant and he agreed.

 

Good luck with it all David

 

Cheers guys
d

 

If the original builder didn't authorise the work then he has no liability for the bill you send him...........VAT or not.

Best of luck...

Shaun

 

If neither Builder is registered for VAT then you cannot charge it too either of them as the bill is from either builder not actually you. You haven't done any work to invoice, you are simply passing a bill on

 

Employing the likes of a builder that is not VAT registered is suggesting he is small fry as it relates to very low (by company standards) earnings throughout a year which also suggests the "builder" / guy has very little work in the way of any values.

Maybe wise to bear this in mind.


I'm not saying all builders that aren't VAT registered are useless as you need to allow for the good guys just starting out.

 

I'm not a VAT expert but I am an accountant.

Firstly is anyone was invoicing you with VAT they should be supplying you with a VAT invoice / receipt. If not then you just ask for one, I have never yet come across anyone supplying a false VAT number but you can check it if you are unsure.

Secondly most sole traders try and keep their "turnover" below the VAT thresh hold so they can keep their prices competitive. They can do this lots of ways, like not declaring all their income (most common) or having a different company for different services.

If you are just passing the cost straight to your builder then you wouldn't add VAT, if you want to charge an admin fee or something along them lines then you can add VAT to that - although this will no doubt annoy the builder so for the same of a few quid its better to leave it. You will also be increasing your Output VAT which means you will be paying it to HMRC.

 

Jack I know of 2 instances this week of deliberately giving a different VAT number because the company didnt have a VAT number (application pending)

Can I ask why a sole trader would want to try and keep the 'turnover' below the VAT threshold ?

I have just applied for VAT registration as I was advised that it would be more beneficial to me

 

I paid the guy to do a job. He didn't do it properly. I gave him ample opportunity to come back and fix it. He told me to f,uck off.

So after getting a selection of tender I paid someone else to fix it.

I believe the original guy has a legal obligation to meet the reasonable costs of said repairs.

==========

Other comments.

I take the point about size of firm and VAT threshold but not sure I entirely agree as there are a lot of tradesmen who do a decent job but are not registered.

JT. Thanks for confirming what I guessed. I will not be charging any VAT as part of an admin fee or whatever.

david

 

If you are registered and buy a product for Ł100 including VAT you claim Ł16 back which is the VAT charged.

If you then sell it for Ł200 you have to pay Ł33 to HMRC as VAT as you have "added value" to the product.

If you are not registered then you cannot claim the Ł16 back but neither do you have to pay the Ł33.

Plus you avoid a lot of boring paperwork.

d

 

Thanks David

I will be mostly charging 'services' ie my time

I may in time sell goods to broaden the services offered, but the main reasons for the business manager telling me I would be better being VAT registered (even if below the threshold) is that it is better for my customers as they expect and prefer VAT registered suppliers and also for what I can claim back

 

It all depends on the nature of the business. When you are VAT registered you can claim back the VAT on expenses incurred by the business, you also then have to pay any VAT you charge on your goods / services.

Example: You buy goods for Ł100 + VAT (Ł20). You then sell them for Ł150 + VAT. You pay the difference in the VAT to HMRC, and this is a cash expense.

VAT is also the cost which we, the customer has to pay and we can't claim it back. So straight away your prices are 20% higher than someone who isn't VAT registered.

Its also hard for cashflow, you might have debtors who are unreliable and always pay late. HMRC want the cash every quarter and you don't want them sniffing around doing a VAT audit because you are always paying late - plus they charge stupid penalty fees if you do this too often.

You don't have a choice if your over the limit anyway. HMRC always win in the end.

 

Sorry I didn't see your post before I replied.

You need to do some calculations really. Do a cashflow and P&L projection for the year. Based on what you have said it doesn't sound like it will be better for you to be VAT registered if your charging VAT on a service - especially if it is just to make your customers feel better. In these harsh economic times we want to pay less, and I don't really think most peoples motivation to buy something is driven from whether the supplier if VAT registered or not.

I obviously don't know your business though so please don't take my word for it.

You have to think about the work involved too, you have to file a VAT return each quarter and they are not easy. Unless you pay someone to do it for you and thats extra costs.

 

OK Jack. It's actually marginal for me at present but I do sell a product much to the trade who "expect" to get a VAT ticket. Working from home, as I do, there are quite a few items that I can legitimately claim for as well.

It's actually a pretty straightforward business and half a day struggling with an Excel sheet gets the return done (and keeps my records tidy). And 20 years experience helps

david

 

Jack and David again thanks for the info

I have some 'potential'customers who will only deal in VAT registered business so if I want their business I have to be VAT registered

I would like to hope I can build the business up to be well above the threshold anyway given time

My business will be mainly in the education sector and some corporate