Have taken on a new engagement and trying to work out what is going on !
Client has company A - a property development company, and company B - a construction company.
Company B is incurring all material and labour costs on the building work undertaken for company A.
Company B is issuing sales invoices for round sum amounts to company A on a regular basis - some of these are standard VAT and others are zero-rated.
Company B is reclaiming VAT on some expenses and not on others.
So presumably company B should be invoicing company A for all new build work zero-rated and everything else standard rated ?
It will therefore presumably be necessary for company B to identify what costs incurred are attributable to new build not reclaiming the VAT, and what costs relate to all other work where VAT can be can be reclaimed.
Is this correct ?
Am not sure how the value of the sales invoices are being measured given the round sum amounts and how they are being attributed to between new build and other building works.