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Roo
Bronze Member
104 Posts |
 Posted - 03 Jun 2008 : 10:24:19 AM
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Help!
We have just had an extension built and builder quoted net price plus 17.5% VAT on the whole of the net price. We were under the impression that he was (or about to become) VAT registered.
Before work commenced he told us that the guy who works with him and the lad who would be helping out in the initial stages are both self-employed and we would be making cheques out to them, thus avoiding paying VAT on their labour.
Then, with the project nearly finished, and cheque payments made on a fortnightly basis to the builder, his assistant and the young lad, he sends us a final invoice which brings the total required to the whole of the amount quoted including the total VAT amount.
When we disputed this he said that he was expecting the bottom line of his quote as that was what we had agreed to pay but at the same time was adamant that we were not paying VAT on labour, totally failing to grasp that his net amount was labour and materials and that by charging VAT on the whole of the net amount that he WAS charging VAT on the labour.
We then sent him a letter saying that we would pay the balance of the net amount on completion of the work and that if he required VAT then he must send us a proper VAT invoice showing his VAT registration number but that we would not pay VAT on the payments made directly to the others.
He has now said that he is not VAT registered and that we were aware of that right from the start (why quote a net price plus VAT if you are not VAT registered?) and that the amount that we owe him relates to VAT on the materials. He has walked out and declined to finish the job.
I know it is illegal to charge VAT if you are not VAT registered but I don't think it was his intention to mislead - I just think he does not understand basic maths (let alone VAT) - and whilst we want to do what is fair we don't feel that we should pay over the odds as we accepted his quote in good faith.
Any suggestions welcomed!
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Merlot
Platinum Member
England
3260 Posts |
Posted - 03 Jun 2008 : 11:05:16 AM
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Oh dear, bit of a mess. Sounds like he hasn't a clue about VAT. He's either VAT registered or he isn't - there's no halfway hotel as far as the HMRC is concerned. If he isn't VAT registered, why did he quote a cost + VAT (eg £20K + VAT) or was that a ruse to squeeze more money out of you (illegally of course ?). The quote should have been without VAT. As far as I am aware, you can't charge VAT on labour and not on materials, or vice versa and you are quite right to ask for a VAT invoice detailing his VAT number (and it's fairly easy to check whether a VAT number is valid).
So for example, has he charged you £23500.00 inc VAT (ie £20000.00 net + £3500.00 VAT) ? If he's not VAT registered, the invoice should just read £23500.00. Or has he charged you £20000.00 inc VAT (ie £17021.28 net + £2978.72 VAT). Either way, if he's not VAT registered there should be no mention of a net figure or VAT, it should just have been a total cost. It's his problem whether or not he's VAT registered and it has nothing to do you with about paying VAT on materials, that's for him to sort out but if he's not VAT registered, he can't reclaim the VAT on materials anyway. Sounds a bit iffy to me.
I would write to him again explaining that you are happy to pay the balance of the cost he quoted you (without the VAT) but not until the work is completed. You could also mention that if he fails to respond or bring things to a mutually satisfactory conclusion, you will be taking legal advice with a view to instituting legal proceedings through your local County Court. Worth trying the nice approach before you sharpen up your teeth. In the meantime, try the Citizens Advice - they may be able to give you some advice.
Hope you get a happy ending with this - such a pain the butt. |
 photo by Eric G Jones |
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rosyw
Platinum Member
England
3756 Posts |
Posted - 03 Jun 2008 : 11:18:02 AM
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It's simple really, if he's not VAT registered, he can't charge VAT!! if he tries, try telling him you are reporting him to HM Customs & Excise.
I would send a cheque for the amount owing WITHOUT VAT, stating in full settlement of invoice number ?????, once he's banked it there is nothing more he can do as he has accepted your payment. |
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Merlot
Platinum Member
England
3260 Posts |
Posted - 03 Jun 2008 : 11:23:10 AM
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| He hasn't finished the job as yet Rosyw, so I wouldn't pay him the balance until such time it's completed. A real pain, all you want is the job finished and builders out of your hair. |
photo by Eric G Jones |
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Roo
Bronze Member
104 Posts |
Posted - 03 Jun 2008 : 12:01:18 PM
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Thanks for the replies. Whole thing is a complete nightmare.
Merlot, using your figures, he quoted £20,000 plus £3500 VAT (shown separately) making a total of £23,500.
I thought if he was not VAT registered then we would just pay the net amount and therefore that is what we put in our letter. However, I can sort of see what he is saying about the VAT on materials. From what I have managed to find out (and I may have got this wrong) a VAT registered builder would quote an amount for labour and the cost of materials (excluding the VAT that he would be charged for the materials by his supplier) and then add 17.5% VAT for the labour and materials onto that amount as he cannot charge the VAT twice, ie include the VAT he was charged on the materials in the net amount and then add VAT again.
So it makes things complicated because, although he is not VAT registered, it is possible he reached his figure in the same way as a VAT registered builder and we should pay the VAT on the materials. Of course, what he should have done is include the VAT that he would have to pay for the materials in his net amount and not show any further VAT.
Really difficult to unravel this.
Thanks again.
Karen |
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NUTTER
Platinum Member
England
2452 Posts |
Posted - 03 Jun 2008 : 12:06:47 PM
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We had simular situation 4 years ago..
builder as yours walked out well i told him to * off!!!
We never paid the outstanding amount which was left owing him £8000
but have to say i know where you are coming from but believe me i wish i had at times bit my tongue as for us to finish exention of its cost nearer 13000 !!! and my husbands time nearly 2 years to get the final building regs certificate.
Ours costed us but then added on for me to pay plumber electricion !!!!which we thought was costed in..
I think as all your builders unless you know them
they understand vat but they can pull the wool over most folks eyes.. but with me no but have to say we were left in a tadge of a mess!!!
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kathleen
Platinum Member
England
1835 Posts |
Posted - 03 Jun 2008 : 12:16:50 PM
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| I would ask him for a copy of all invoices for Materials supplied and used from the merchants and then sepperate them from the labour costs in to 2 bills and pay them seperate and then he can not charge vat on his labour and you can see what the materials are with Vat already on them |
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Edited by - kathleen on 03 Jun 2008 12:19:27 PM |
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rosyw
Platinum Member
England
3756 Posts |
Posted - 03 Jun 2008 : 12:19:43 PM
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| When he quoted for the job, he should have worked out the cost of the materials including the VAT he had paid, then added any mark up on that - then added the labour costs. He can't say the materials cost x amount plus VAT so is charging you the VAT, however he works it out he cannot put a charge for VAT on the bill if he's not VAT registered. |
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kathleen
Platinum Member
England
1835 Posts |
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Roo
Bronze Member
104 Posts |
Posted - 03 Jun 2008 : 2:06:47 PM
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Thanks again for the replies.
Kathleen - it was a fixed price quote not an estimate. Only problem is trying to interpret the quote in light of the fact that he is not registered for VAT.
Rosie, I agree, there should not have been any mention of VAT in his quote at all. From what I can gather, he used a software programme to work out his quote. I assume (and this is just a guess) that the programme assumes the builder is VAT registered and comes up with a net figure and then adds on the VAT for labour and materials whereas he should just have added the VAT for the materials onto the net amount and quoted that as a new net amount with no VAT shown. |
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Merlot
Platinum Member
England
3260 Posts |
Posted - 03 Jun 2008 : 2:26:33 PM
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Hi Roo
Surely though (mind you, not 100% on this) if he isn't VAT registered, there should be no VAT implications on anything, materials or labour. Or am I missing something altogether about VAT and builders ? Yes, he would have to pay the VAT on any materials he buys for your job but if he isn't VAT registered, he wouldn't be able to reclaim the VAT from those materials for himself anyway. He shouldn't really have used a software programme which assumes he's VAT registered - maybe he could have used a zero code (ie 00%) when inputting the costs but wasn't savvy enough with the programme. Either way, it doesn't help you does it.  |
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sub
Platinum Member
United Kingdom
1919 Posts |
Posted - 03 Jun 2008 : 3:15:45 PM
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The builder cannot charge VAT on anything unless he is VAT registered.
He is not able to claim VAT back on material costs - and definately cannot charge you for it.
If he is supplying quotes including VAT and not displaying a valid VAT number he is breaking the law. Wonder how many people have paid him VAT?
My mother in law was caught out by a builder like this. He quoted her with VAT - she duly paid on completion and he provided her with an invoice and reciept.
When she showed this to me I queried the VAT as his invoice was not a valid VAT one.
I checked online and no VAT number registered for his company, so I called him up.
When confronted, he backed down quite quickly and refunded the VAT amount she had paid.
I still reported him though - don't know how many other people he overcharged in this way. |
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