VAT on building material for reduced rate project

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Hi,

My client a bathroom design and material company say A ltd, is been asked by their customer say B Limited to charge reduced rate VAT on the bathroom material supplied because B Limited is providing reduced-rate services to their client Tom Tanks.

It's obvious that my client A ltd should charge standard rate, B Limited will recover the VAT paid from HMRC and charge Tom Tanks a reduced rate for their services and incorporated goods.

B Limited is adamant what A ltd should also charge him reduced rate because he is charging his client Tom Tanks reduced rate.

1-Is there any such rule or any way of doing so (ignore the disability factor)

2-For my knowledge should B  Limited add the gross amount of material purchased to its invoice and then charge 5% VAT

Thanks

 

Replies (3)

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chips_at_mattersey
By Les Howard
30th Apr 2020 17:02

Supplies of goods are always standard rated.
It is only supplies of construction services that can be reduced rated.

A Ltd has to charge at 20%, which B Ltd recovers in full.
To answer your question 2 - how B Ltd calculates the value of his services is a separate question, but do remember to add in the cost of the contractors.

Thanks (1)
RLI
By lionofludesch
30th Apr 2020 17:10

Ask B Limited to say which part of the reduced rate schedule applies to A's supply to B.

That usually kills the argument.

A's not a party to this final contract. How would he know it's reduced rate ? And if he did, how would he know that his goods are being used for that contract ? They might be installed in the director's ensuite for all A knows.

Thanks (1)