Does a building subcontractor charge VAT on his labour on a new-build?

Does a building subcontractor charge VAT on his...

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My client is a subcontractor (CIS) for a a Limited Co. who is building residential houses on several plots. They informed him that he shouldn't charge them VAT as it is new-build.

VAT Notice 708: buildings and construction sections 2.1.3 and 17.4 seem to contradict each other. Extracts are below.

Can anyone enlighten me please as to whether he should invoice for VAT?

2.1.3 Subcontractors
Subcontractors are contractors who work to other contractors. For the most part they can zero-rate or reduce-rate their supplies according to the building being constructed or worked on ...

17.1 When does a contractor or developer need to hold a certificate?

You need to hold, within your business records, a valid certificate when you make:
any zero-rated or reduced-rated supply in connection with a building that will be used solely for a ‘relevant residential purpose’ ...

17.4 Should subcontractors accept certificates?
No. If you are a contractor working to a main contractor, you should not be issued with a certificate. You must always standard-rate your supply when working on a certificated building.

Replies (11)

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Portia profile image
By Portia Nina Levin
25th Apr 2015 11:43

(No subject)

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paddle steamer
By DJKL
30th Mar 2015 12:12

Confusion re "Relevant Residential" and "New Build"

The OP needs do have a close look at what is "Relevant Residential" and he/she will see they are mixing apples and pears. (Relevant Residential and New Build residential property are not the same thing)

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By User deleted
30th Mar 2015 12:26

I do wish ...

... that the powers that be would come up with a better term than "relevant residential". Although it is no excuse for not knowing the correct VAT treatment, it is a term that continually confuses and trips people up. One shouldn't have to drill down into the detail in order to understand that 'relevant' has a particular meaning and that the residential status of a new dwelling is not relevant.

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By Martin B
30th Mar 2015 13:05

Does a building subcontractor charge VAT on his labour on a new-

Flagging

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Portia profile image
By Portia Nina Levin
25th Apr 2015 11:44

(No subject)

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By ugdiv
30th Mar 2015 15:29

Would the Subcontractor need to see or keep written proof?

The main contractor would have the certificate, but the subbie would have to take their word for it.

What evidence would the sub contractor need to keep, to prove the work was zero rated?

Otherwise it seems to be open to abuse..

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Replying to Jennifer Adams:
paddle steamer
By DJKL
30th Mar 2015 16:02

There is no certificate if just new build residential

ugdiv wrote:

The main contractor would have the certificate, but the subbie would have to take their word for it.

What evidence would the sub contractor need to keep, to prove the work was zero rated?

Otherwise it seems to be open to abuse..

If New Build Residential no certificate is needed, the certificate is only on point re relevant residential etc, However one of the conditions for zero rating a New Build is that "statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent" Tolley's Property Taxation 2009-2010, 15.142 (d) (my most recent copy).

If I were the subcontractor (person constructing, or one of the persons constructing)  I would print from the web a copy of the planning permission and building warrant and would be careful near the end of the project that I was correctly charging the appropriate vat rate pre and post completion. (Care needed as supplies post completion may well be Standard Rated)

 

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Portia profile image
By Portia Nina Levin
25th Apr 2015 11:44

(No subject)

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By ugdiv
30th Mar 2015 16:11

Thanks everyone!

Thanks to each of you who have replied.

It does seem a great idea to get a copy of the planning etc. and keep details of the contractor on file.

Thanks again!

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By Dave biggadike
23rd Jan 2018 22:36

Hi can someone guide me to where paragraph 17.4 appears I regulations thanks

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Replying to Dave biggadike:
By Ruddles
23rd Jan 2018 23:21

Yes - read the question again.

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