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Does Labour on New Build have to register for VAT?

Turnover exceeds £85,000 for Labour Service on New Build

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Hi 

We are a partnerhip company providing service only - labour at new builds.
We do not buy materials since these are being bought by the developer we work for.
Our turnover has just exceeded the threshold of £85,000 but this is temporary as we are not planning to have so much work and income next year.
Do we have to register for VAT? We wouldn't claim anything back as - as mentioned earlier  -we are not buying anything and for labour service at new build the charge is 0-rated?

Thank  you

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13th Feb 2019 10:25

Yes - unless you can convince HMRC that your turnover is not likely to exceeed £83000 in the next twelve months. Or - you could apply for exception on the grounds that all your turnover is zero rated.

You seem to have a good chance of this.

It's important that you get their agreement. If not you could be held liable for VAT from the beginning of the second month following the month in which you crossed the £85000 threshold.

You've measured your turnover on a rolling 12 month basis, I take it ?

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13th Feb 2019 10:49

Thank you @lionofludesch!
Yes the turnover has been measured on a 12 month basis.

If we don't get the agreement from HMRC, you said we would be liable for VAT from the beginning of the second month following the month in which we crossed the £85,000 threshold, BUT could you explain a bit more, on what basis would we pay the VAT?
As we work at new builds only we would still be providing invoices to the developer for our service as zero-rated?
Thank you

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to Krystyna
13th Feb 2019 11:46

Quote:

Yes the turnover has been measured on a 12 month basis.

Lion's question was phrased in a certain way on purpose. Have you assessed on a ROLLLING basis?
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to Wanderer
13th Feb 2019 13:01

To be honest, not on a rolling basis, we just checked the income amounts from April 2018 and added them up.

The contractors have been in business as partnership for the last few years and they've been filing tax returns for years April to April and just realised now that from April 2018 their income just exceeded £85,000.
When calculating on 12-month rolling basis how far back shall I check, starting from January 2018?

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to Krystyna
13th Feb 2019 11:56

Yes - you need to do the calculation every month, based on the previous twelve months.

You don't just run up to your year end and then start again on zero.

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to lionofludesch
13th Feb 2019 12:59

The contractors have been in business as partnership for the last few years and they've been filing tax returns for years April to April and just realised now that from April 2018 their income just exceeded £85,000.
When calculating on 12-month rolling basis how far back shall I check, starting from January 2018?

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to Krystyna
13th Feb 2019 13:14

Oh dear.

So actually, it's based on turnover to 5th April 2018 ?

Lucky for you that your work isn't standard rated. It would've cost you thousands by now.

You need to start at the beginning - list all the months and the turnover month by month. For each month, add up the turnover for that month and the previous eleven (even if it was zero or before you started trading). The first time it's more than £85,000 is the relevant month. The date you need to register from is the first day of the second month after the relevant month.

So, if you started on 1st April 2018 and your turnover for each month is £40000, your relevant month is June 2018 (when your sales in the last 12 months would be £120000) and you need to register from 1st August 2018.

Your accountant should've explained this to you.

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to lionofludesch
13th Feb 2019 13:24

Hi

Thank you, no it is based on the turnover to 5th of April 2019.
Thank you for the explanation.

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to Krystyna
13th Feb 2019 13:34

So either the trade is fortune telling - or you've actually taken £85000+ in ten months.

Equivalent to £102000 in a full year. That would make it harder to convince HMRC that you'll be below £83000 in the next twelve months.

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to lionofludesch
13th Feb 2019 13:51

Yes that is correct, this has been calculated looking at the past 10 months.... as this is a partnership we did not know we needed to make these calculations. Previous accountant didn't mention this when they did the tax return for us every year 6 April 2-01 to 5 April 20-2.
We thought we start from zero each April
We learn something new every day!

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to Krystyna
13th Feb 2019 14:04

Well, that's the risk you take when you don't have an accountant.

Luckily for you, it's unlikely to cost you anything.

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to Krystyna
13th Feb 2019 12:17

Quote:

As we work at new builds only we would still be providing invoices to the developer for our service as zero-rated?
Thank you

You'll charge VAT at 0% - nothing. You'll be able to reclaim all the input tax you pay on fuel, tools and other expenses. Whether you feel that's worthwhile is up to you.

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