Builder vat, cis, disbursement

Building fleecing me

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Have engaged a builder for property renovation under a cost plus 15% contact.   Have had an enlightenment on his finance ethics which is giving me MAJOR red flags:

 

Not sharing the full invoices supporting the cost of materials 

Charging me vat on all materials (not applying disbursement vat)
 

charging me vat on labour (now learn he pays his subbies cash and they have to do their own tax). This makes me believe he is not cis registered. 

finally the biggest clanger.  Charged me vat on EVERYTHING, including his 15% and most importantly not showing vat registration number in any invoice.  Not even vat pending.  First 2 invoices are in excess the £85k vat threshold. And he's just completed a £850k job prior.

not a registered Ltd company, so cannot check on companies house.  Assume sole trader or even just self assessment (if he's even registered)   

am now employing a qs to take over, but too many red flags. Plus he's now avoiding my request for his vat number

 


 

 

Replies (15)

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By David Ex
22nd Jun 2024 14:44

Thanks for letting us know.

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Replying to David Ex:
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By Happyjippy
22nd Jun 2024 15:31

Apologise. It should’ve read is this correct way of working?

Sorry. A bit stressed

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By Happyjippy
22nd Jun 2024 15:29

Apologise. It should’ve read is this correct way of working?

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VAT
By Jason Croke
22nd Jun 2024 16:20

None of that sounds right but you need lawyer, not an Accountant.

What does the contract say, you do have a detailed contract hopefully.

If charging VAT, builders invoice MUST show a VAT number else you can pay the net amount until proof is given, but then withholding payment usually means builder will stop work....hence you need a lawyer or small claims court action.

You a try reporting builder to HMRC but they really don't seem to care.

CIS wouldn't usually be applicable to a consumer contracting for building works.

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Replying to Jason Croke:
RLI
By lionofludesch
22nd Jun 2024 19:23

Jason Croke wrote:

None of that sounds right ....

Surely an exaggeration.

This sounds right to me.

"Charging me vat on all materials (not applying disbursement vat)"

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Replying to lionofludesch:
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By FactChecker
22nd Jun 2024 20:13

The only possible bright spot for OP is that the sub-title of post says "Building (sic) fleecing me".
It is of course more usual to add the fleecing insulation to the property, rather than the owner, but it's possible that those materials fall into the zero-rated category.

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Replying to lionofludesch:
VAT
By Jason Croke
22nd Jun 2024 22:16

Fair point, I think I was generalising the none of it sounds right - no VAT number, turnover of £85k, not being CIS registered - none of it sounds right! Agree though, unlikely to be a disbursement, but the fact the OP is using these words suggest either the OP or the builder have used these words when discussing prices and/or the OP seems to think they are disbursements.

OP doesn't state what the works are, they state "renovations", much like posters here saying the "have a vehicle" rather than saying they have a car or van, renovations could be a new build, could be zero rated...builders will often ask the customer to buy materials to keep their own turnover down...but not disbursements, instead customer just buys goods from the builders preferred merchant, etc.

But apologies if my sweeping statement was perhaps too sweeping.

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Replying to lionofludesch:
Danny Kent
By Viciuno
23rd Jun 2024 14:29

OP - although not applying "disbursement VAT" sounds correct, if the builder is charging VAT on top of the VAT inclusive price then they are having two bites of the same pie and that doesn't sound right either!*

*subject ofc to whatever contract you signed, which hopefully didn't allow the builder to recharge you VAT inclusive prices, plus a mark-up, plus VAT.

Also worth noting that I can't see any reason why disbursement VAT would even be beneficial in your situation as I can't think of any building supplies that are bought that would be zero rated/exempt that you would then have to pay VAT on when recharged to you. Basically, don't die on this hill as it's probably meaningless.

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By Matrix
22nd Jun 2024 19:30

Do you have a contract and have you paid him? And has he done the work invoiced. I don’t see if he deducts tax on his subbies or not affects the price of the job.

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By Matrix
22nd Jun 2024 19:55

Has he done work and you are now trying to get out of paying?

I don’t know what you mean by red flags but, whether he operates CIS or not, doesn’t change the amount due. Refer to the contract.

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Stepurhan
By stepurhan
22nd Jun 2024 21:31

Quote:
Charging me vat on all materials (not applying disbursement vat)
There are strict criteria for a charge on an invoice to be treated as a disbursement. If all those criteria are not met, then VAT must be charged on VATable items.

So, on the information given, this query reads more like "I did not get a clear contract with my builder and now want to complain about things that haven't worked out the way I wanted them to". Whilst it sounds like (assuming the one side of the story we are getting is 100% accurate) the builder has made some errors, you have almost certainly made significant errors yourself.

If you have a contract, get a legal adviser to look at it. If you don't have a contract, maybe get a legal adviser involved, but consider whether the much larger legal fees arising from the lack of contract are worthwhile.

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By rmillaree
23rd Jun 2024 12:22

Charging me vat on all materials (not applying disbursement vat)

The default position is that vat should be charged on materials - ok disbursement may be possible but all the strict conditions need to be me including "it was your customer’s responsibility to pay for the goods or services, not yours"
https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers

"charging me vat on labour (now learn he pays his subbies cash and they have to do their own tax). This makes me believe he is not cis registered."

unless you have indicated you are engaging him under cis rules then cis does apply and vat should be charged.

Charged me vat on EVERYTHING, including his 15% and most importantly not showing vat registration number in any invoice. Not even vat pending. First 2 invoices are in excess the £85k vat threshold. And he's just completed a £850k job prior.
well ask him for vat number its not too hard

Note all this stuff should be clarified at point of negamenet when you award contract - you ask them to clarify whether vat will be charged and ask them to provide vat number to be checked - if you are treating work as cis you should also ask for that details to pre verify if they are cis.

It may be sketchy but i have not seen anything obviuously wrong from what you have posted other than the vat number not being provided (and being shwon on invoices)

Both parties should always have cyrtsal clarity ref cis and vat before proceeding - not doing so ends up in ames such as yours.

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Danny Kent
By Viciuno
23rd Jun 2024 14:38

Happyjippy wrote:

charging me vat on labour (now learn he pays his subbies cash and they have to do their own tax). This makes me believe he is not cis registered. 

 


 

 

There is nothing illegal about paying for anything (including services) cash. Why do you believe he is not reporting CIS on this basis; it's not difficult to process CIS and pay someone cash.

VAT should almost certainly be charged on all his supplies to you, including his markup on the materials.

The VAT number is a red flag though. Probably the only red flag in your post. You could try calling HMRC's VAT helpline. Doubt they would be much use, and probably a waste of your morning. You never know though.

Be vary careful about throwing round speculative accusations about someone without proof.

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DougScott
By Dougscott
23rd Jun 2024 16:58

The fact that you are asking on this forum suggests you want advice for free and may have taken the "cheap" approach to appointing a builder. Normally you would use an architect for the planning and project management and then go out to tender based on reputable builders they recommend.

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By I'msorryIhaven'taclue
24th Jun 2024 11:35

Are you by any chance paying his invoices to you with cash?

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