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Vat on building conversion

Vat on building conversion

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We have a client who is converting an office back to a home for themselves, it is a standard brick building that was used for a number of years as an architects office. They have engaged a builder who isnt vat registered and have been buying (under instruction of the builder) the materials directly from the suppliers, the suppliers have been charging 20% vat. How would they get the vat reduced to 5%, is this at all possible in this circumstance.

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By Cloudcounter
13th Feb 2019 10:04

They don't. The 5% VAT rating would be for a builder to apply to his supply.

If they use a non registered builder, then it doesn't come in to play.

Thanks (1)
Replying to Cloudcounter:
Psycho
By Wilson Philips
13th Feb 2019 10:13

But they may be able to get the VAT back under the DIY scheme, effectively reducing the VAT rate to 0%, which is even better than 5%!

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Hallerud at Easter
By DJKL
13th Feb 2019 10:15

The builder's merchant has to supply the materials at 20% to whoever purchases them from him/her, there is no scope for the BM to vary this rate unless the BM is actually doing the construction (which he/she is obviously not as is a BM not a builder)

What your client could do is create say a Ltd Co which becomes the main contractor, purchases materials, pays the non vat reg builder as a sub, but this has all sorts of ramifications re CIS scheme and warranties and liabilities re the works, plus of course admin/professional costs. In addition the builder's labour is now having vat attached when client's limited invoices client.

You could try to convince your builder to register for vat and buy the materials and recharge labour with materials, the materials would likely charge at same rate as the labour, but of course you have added the 5% vat on labour to your costs and suspect builder will not like idea.

The question to ask is does the value of the vat lost on materials merit the hoops to be jumped through?

Thanks (1)
Replying to DJKL:
Psycho
By Wilson Philips
13th Feb 2019 10:26

Why do they need to jump through any hoops? Surely the answer is simply to reclaim the VAT under the DIY scheme?

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By CW2012
13th Feb 2019 10:15

Sadly that was my perception, disappointingly I know these people personally and they never asked my advice before leaping in. I wondered as to whether there was some odd [***] in the rules, but if its not to be so be it.

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Replying to CW2012:
Psycho
By Wilson Philips
13th Feb 2019 10:27

I'll repeat it again - your client should be able to recover at least some of the VAT through the DIY scheme.

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Replying to Wilson Philips:
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By Vile Nortin Naipaan
13th Feb 2019 10:35

The OP's not interested. They've had their own opinions confirmed for them and fuched off. That's how this place tends to work. OP's tend not to be too interested in the right answer, but it's there for others to see.

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Replying to Vile Nortin Naipaan:
Psycho
By Wilson Philips
13th Feb 2019 10:56

So it would seem. And I've also noticed that some people, faced with answers they don't like, are allowed to delete their question. This is the first forum I've ever seen where such behaviour is allowed - it's very odd.

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By CW2012
13th Feb 2019 10:54

The OP is interested, the answers run out of sync, my answer was to the first post. I will look into the DIY scheme which had completely slipped my mind, that's the problem with being a general practitioner, you cant know or remember everything.

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