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VAT Reclamation for House Builder

What can I reclaim VAT on?

Didn't find your answer?

I work for a construction company mainly dealing with new build housing. In this instance assume that our supplies are zero rated.

My understanding, when it comes to the reclamation of VAT, is that we should reclaim all VAT charged to us with the exception of the following items:-

Goods on hire

Professional services (presumably including engineers and consultants)

White goods

Scaffolding / Formwork

EG Invoice for bricks = £1000 plus VAT = £1200...we claim back £200 in VAT

Invoice for hire of plant = £1000 plus VAT = £1200 ... we claim back nothing and the cost to us is £1200. 

I cannot understand why there doesn't seem to be a straightforward answer to this anywhere.....unless I'm looking in the wrong place. Also, what counts as plant hire? Are skips included?

Replies (56)

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By The Dullard
12th Nov 2019 16:29

Let me rewrite your list for you:

White goods.

You can reclaim the VAT on all the other items you mention. It's just that the person supplying them to you cannot zero-rate their supply.

That's assuming that your zero-rated supplies are of major interests in dwellings.

If your zero-rated supplies are of construction services and materials, then you can recover all of the input VAT, but must charge VAT on the white goods, and any of the other items that you supply separately from your construction services.

Thanks (1)
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By spidersong
12th Nov 2019 17:06

If you were building your own house then you'd largely be right, but as a company presumably building new build houses for other people then just listen to 'The Dullard'. (Although you may want to add: fitted furniture excluding kitchen units, and carpets to the list as they are also not recoverable).

However since your post implies that your employer has already started trading you may want to listen to the voice that says "why am I working for a company that deals in multi thousand pound transactions which doesn't seem to have verified or taken advice on the proper VAT treatment of its transactions, I wonder if its done the same in other areas of its business?"

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RLI
By lionofludesch
12th Nov 2019 18:38

Seriously - DIY accounting is not for you.

A visit to an accountant will clearly repay itself a hundred-fold.

It looks to me as though you're looking at the DIY builder rules instead of the building business rules.

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Replying to lionofludesch:
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By Jon Dawson
13th Nov 2019 09:01

My apologies.
I thought this was a forum where people gave constructive answers.

It is an aspect that has always confused me. If you honestly think that VAT notice 708 is an easy read and as clear as day then you are quite clearly a better person than I am, or possibly lacking in friends and have alot of time on your hands.

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Replying to Jon Dawson:
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By JoF
13th Nov 2019 11:06

Actually your answer has really really annoyed me.

By what right do you think you should get free advice from an Accountant, who has trained for years to be able to understand the nuances of the law around tax and accounting?

By what right when someone suggests you take professional advice do you then have to sling insults around?

The advice was wholey appropriate.

In fact I would go so far to say that you need a new (properly trained) Accountant because it sound like yours hasnt been doing any CPD! More so you need a VAT consultant. In your line of trade, given the vast number of variances in each job, the latter is a must if you dont want to fall foul of HMRC and are not conversant with the law (never mind the VAT guides).

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Replying to Jon Dawson:
Psycho
By Wilson Philips
13th Nov 2019 13:46

Jon Dawson wrote:

you are quite clearly a better person than I am, or possibly lacking in friends and have alot of time on your hands.

I would go for the former.

Thanks (3)
Replying to lionofludesch:
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By Jon Dawson
13th Nov 2019 09:32

Actually, your answer has really annoyed me.

I'm not sure that VAT is the easiest aspect of accounting to comprehend. You've only got to look at the confusion between cakes and biscuits to realise that. However, in this case you clearly have an understanding of the area in which I don't.

In fact, I assume that from the tone of your reply there is no question in accounting that you could not answer.

Perhaps, in future, just consider what you are about to say for a second. Once you've considered it then why not construct a response that answers the question clearly and with reasoning. That way you would have helped the questioner and I would have thought that would make you feel good about yourself. I think your actual response says all people need to know about what actually makes you feel good.

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Replying to Jon Dawson:
Hallerud at Easter
By DJKL
13th Nov 2019 09:50

The advice given was good, go to an accountant as suggested. People on here may answer odd questions for non accountants (which I presume you are) but they are not, for free, going to teach you.

Your choices are read 708 carefully , read a book that may/may not be clearer, go on a course or find an accountant who will clarify your misconceptions- Lion even indicated where he thought you were going wrong, what more do you want for nothing?

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Replying to DJKL:
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By Jon Dawson
13th Nov 2019 10:11

By that logic, every answer to every question would be to seek the advice of an accountant.
Personally I think that is a very clear question and requires a really simple answer.
The first responder seemed to manage this perfectly well.
I have read 708 through and have spoken with an accountant and neither of us are clear on the answer.

Thanks (0)
Replying to Jon Dawson:
Hallerud at Easter
By DJKL
13th Nov 2019 10:38

Well your reading is incorrect and frankly not sure the accountant you asked is an accountant. What particular section /sections of 708 leads you to the conclusions you have reached, this might be helpful?

All you have really said is "I believe this is correct after reading 708" and people have said no, it does not say that.

They cannot point to where in 708 in permits input deduction because 708 is in the main more concerned with the vat position of outputs (except re say blocked goods) .

It is to me frankly pretty obvious that a vat registered business may claim input vat properly charged to it in respected of zero and standard supplies it is onward making, so your conception that they are say blocked re vat on inward plant hire make little sense to me.

To me that misunderstanding signifies you cannot possibly be an accountant which then gets us to the best advice to give in such a scenario, take advice from one, because sure as eggs are eggs if you are making this mistake you are likely making others.

Now if that does not help go buy a book, like Tolleys Property Taxation and do the work of reading it and if that does not help go back and start on say Tolley's Vat Annual.

Thanks (2)
Replying to Jon Dawson:
RLI
By lionofludesch
13th Nov 2019 10:43

Jon Dawson wrote:

I have read 708 through and have spoken with an accountant and neither of us are clear on the answer.

Yet you say it's a very clear question and requires a really simple answer.

Interesting.

Thanks (3)
Replying to Jon Dawson:
RLI
By lionofludesch
13th Nov 2019 09:53

Jon Dawson wrote:

I'm not sure that VAT is the easiest aspect of accounting to comprehend.

Hence the suggestion that you consult an accountant. Face to face.

You hold some serious misconceptions. Much more basic than the nuances between cakes and biscuits.

You don't say where you got the idea that you couldn't claim VAT on plant hire but I suspect you're looking in the wrong place altogether.

Advice to consult an accountant often offends querists on this site. But that doesn't make it bad advice.

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Replying to Jon Dawson:
RLI
By lionofludesch
13th Nov 2019 09:55

Jon Dawson wrote:
I think your actual response says all people need to know about what actually makes you feel good.

Yes - putting folk on the right track - for free - gives me a warm glow.

Sneering responses from those I help don't deter me.

Thanks (4)
Replying to lionofludesch:
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By Jon Dawson
13th Nov 2019 10:06

Seriously - Offering advice is not for you.

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Replying to Jon Dawson:
RLI
By lionofludesch
13th Nov 2019 10:12

Jon Dawson wrote:

Seriously - Offering advice is not for you.

Well, the thanks I get on this site suggests otherwise, so I'll carry on, if that's OK with you.

If it isn't, I'll carry on anyway.

Thanks (7)
Replying to lionofludesch:
Caroline
By accountantccole
13th Nov 2019 11:42

Go Lion - we've got your back...…
Valued contributor - ignore the nay sayers

Thanks (3)
Replying to accountantccole:
RLI
By lionofludesch
13th Nov 2019 12:05

I'm not taking any carp from a bloke who's only ever contributed to threads he started.

Thanks (3)
Replying to lionofludesch:
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By SWAccountant
13th Nov 2019 13:12

Ooh yay!

Getting annoyed because people won't take the time to construct a helpful answer to a complex matter for free? Love it.

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Replying to SWAccountant:
RLI
By lionofludesch
13th Nov 2019 14:29

The thing is - it doesn't sound that complex.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
13th Nov 2019 14:54

It isn't.

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Replying to lionofludesch:
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By Jon Dawson
13th Nov 2019 17:02

Well, just answer the question then and set me straight!

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Replying to Jon Dawson:
RLI
By lionofludesch
13th Nov 2019 17:15

Jon Dawson wrote:

Well, just answer the question then and set me straight!

Dulls answered it in the very first post but you were too busy taking offence.

"Let me rewrite your list for you:

"White goods.

"You can reclaim the VAT on all the other items you mention. It's just that the person supplying them to you cannot zero-rate their supply.

"That's assuming that your zero-rated supplies are of major interests in dwellings.

"If your zero-rated supplies are of construction services and materials, then you can recover all of the input VAT, but must charge VAT on the white goods, and any of the other items that you supply separately from your construction services."

I have nothing to add to that comprehensive advice, other than you take the time to read it.

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Replying to lionofludesch:
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By Jon Dawson
14th Nov 2019 19:24

Then why did you bother adding to it?

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Replying to Jon Dawson:
RLI
By lionofludesch
15th Nov 2019 10:11

Jon Dawson wrote:

Then why did you bother adding to it?

Oh - poor Jon.

"Why is everyone getting at me ? I only asked a very simple question on a very basic subject and only need to be told the answer half a dozen times or so before it sinks in."

Let's have a look at your record, Jon. You joined the forum over seven years ago, since when you have posed 12 questions and made 23 replies - all to threads you started. At no time have you made any contribution to anyone else's thread. You are one of life's takers.

You say that you do not use the forum often as you do not have the time. You've plenty of time when you have a problem. This forum survives on people who provide answers.

You say that you have recently begun to work for a construction company, no doubt to explain your lack of knowledge of day to day VAT accounting. Yet six of your twelve queries are construction related. On 1st June 2012, you had a client who was a small residential developer. By 12th July 2012, you worked for a company which was a developer. Eight days later, you seem to have been in practice again. I would suggest to you that seven years in or around the construction business should be enough to grasp principles which are core to the industry in which you work. Input tax deduction is a day-to-day matter; it is not something that crops up so occasionally that one can be forgiven for not being aware of some esoteric HMRC ruling.

You may hold a contrary view, of course.

Thanks (1)
Replying to Jon Dawson:
Hallerud at Easter
By DJKL
13th Nov 2019 17:34

People have. The first posts on the thread gave you your answer.

You reclaim the vat on hired in plant, scaffolding etc IF it has been PROPERLY charged to you, if it ought not to have had vat on it then this is not a vat issue as such this is an overpaying sub contractors issue/ managing the construction issue, but your project manager/QS/Supervising architect et al ought to know their way around all this.

.

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Replying to SWAccountant:
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By Jon Dawson
13th Nov 2019 17:01

Sorry. Apparently it's not complex. Not bothered that he didn't answer the question, just the condescending manner in which he answered that frustrated me.

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Replying to Jon Dawson:
RLI
By lionofludesch
13th Nov 2019 18:13

Jon Dawson wrote:

Sorry. Apparently it's not complex.

No it isn't.

You claim to have nothing but zero rated outputs. Recovery of input tax is very straightforward.

Follow Dulls' advice and stop whinging.

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Replying to Jon Dawson:
RLI
By lionofludesch
13th Nov 2019 18:13

Jon Dawson wrote:

Sorry. Apparently it's not complex.

No it isn't.

You claim to have nothing but zero rated outputs. Recovery of input tax is very straightforward.

Follow Dulls' advice and stop whinging.

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By JCresswellTax
13th Nov 2019 10:50

Absolute bawbag!

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By The Dullard
13th Nov 2019 10:50

Being the first responder, who gave a simple answer - I have a reputation for being extremely helpful, and giving concise responses - I do agree that professional advice should be sought, largely on a project by project basis.

Two apparently very proximate situations can have entirely different VAT treatments due to some very subtle difference between the two situations. The confectionery/biscuit/cake situation being just one of them - don't even get me started on iced tea and chocolate Nesquik -but this principle pervades the VAT regime.

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Replying to The Dullard:
Hallerud at Easter
By DJKL
13th Nov 2019 11:18

Did not know Nesquik could still be obtained, I must get hold of some and some vanilla ice cream to go with it.

Must also search out some other 1960s/70s delights ; Angel Delight, Instant Whip, Smash, boil in the bag Cod in butter sauce (or parsley), Vesta Chow Mein (with the rather interesting crispy curly bits) and of course who can forget the "tray" dinner with the foil pulled back at the corner to allow the yorkshire pudding to rise.

We really ate some ****

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Replying to DJKL:
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By The Dullard
13th Nov 2019 11:22

We keep Smash in our kitchen cupboard, in case the frozen mashed potato knobs run out.

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Replying to The Dullard:
Hallerud at Easter
By DJKL
13th Nov 2019 11:41

Is frozen mash any good? We have never tried it (i think) , we tend to be more old school peeling, boiling, mashing, hand blender etc then use fill rings on the plate to get that Masterchef presentation with two pieces of asparagus balanced atop, a right faff. The convenience of mash in the freezer ,presumably heating in a microwave ,sounds appealing, even if it does not have that special Smash synthetic taste.

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Replying to DJKL:
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By The Dullard
13th Nov 2019 11:43

Frozen mash is amazing! Takes a bit of practice getting the quantity right, but a bit of milk and butter and nobody would ever know you haven't been through all the graft. Big fan of Aunt Bessie too!

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Replying to The Dullard:
RLI
By lionofludesch
13th Nov 2019 11:55

The Dullard wrote:

Frozen mash is amazing!

Agree. Great advice.

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Replying to DJKL:
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By JoF
13th Nov 2019 11:54

Get yourself a potato ricer to save on faff and add a raw egg for really chefy fluffy mash. You can freeze it.

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Replying to JoF:
Hallerud at Easter
By DJKL
13th Nov 2019 12:28

No more gadgets!!!!! The kitchen is not small but it is not big, say 12ft by 12ft, it is already crammed-the Kenwood sits on the worktop (its add ons in cupboards)plus coffee machine, toaster, coffee grinder, blenders , auto cutters (electric and hand), myriad cake/biscuit/muffin tins and moulds, heated hot tray et al.

The units are crammed, we have a blanket box seat at window with even more lesser used items (ice cream makers and such like) and I am trying to instigate a one out one in policy re kitchen gadgets.

However notwithstanding above wonder if the Kenwood has a ricer attachment- Christmas present ideas loomin- that and the pasta sheet roller I have had my eye on might make great presents.

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Replying to DJKL:
RLI
By lionofludesch
13th Nov 2019 14:33

DJKL wrote:

No more gadgets!!!!! The kitchen is not small but it is not big, say 12ft by 12ft, it is already crammed-the Kenwood sits on the worktop (its add ons in cupboards)plus coffee machine, toaster, coffee grinder, blenders , auto cutters (electric and hand), myriad cake/biscuit/muffin tins and moulds, heated hot tray et al.

If Our Lass moved out, I could cheerfully clear all our worktops.

Seriously, why would I need a NutriBullet ?

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
13th Nov 2019 14:58

A what ?

Not heard of that. Forgot we also have a toastie maker (that is a good invention) and I think lurking somewhere there could be a waffle gizmo belonging to my son.

It is not that I do not cook, I do, but I somehow manage it without most of the kit (though I do like the Kenwood and the cord pull veg/onion chopper thingy- no idea where that came from but it is really useful)

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Replying to DJKL:
RLI
By lionofludesch
13th Nov 2019 15:03

DJKL wrote:

A what ?

Well, exactly.

I wouldn't even have a toaster. What's up with the grill ?

If we still had a coil fire, I'd use a proper toasting fork.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
13th Nov 2019 17:37

Use the grill for bacon on a Sunday so need the toaster at the same time for either the toast or the bagels.

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Replying to DJKL:
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By JoF
13th Nov 2019 11:23

Ive seen Nesquik and Angel Delight in Morrisons, no idea about the rest, although a pal of mine was desperate to recreate her youth and went on the hunt for boil in the bag code in parsley sauce. She found some, said it was vile! No idea why she was surprised, it was vile back in the day too.

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Replying to JoF:
Hallerud at Easter
By DJKL
13th Nov 2019 11:36

Will need to send other half there but doubt she will go willingly- number one daughter ,after her eternal years at university (now also has her Msc) ,is occupying her time, at least until a more serious employer arrives,doing Asda self scan duties etc, as a result we enjoy staff discount so heading to expensive Morrisons may be a problem- I may have to go by myself (shudder-I hate shopping, must check if Amazon sell these items)

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Replying to DJKL:
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By lesley.barnes
13th Nov 2019 15:40

You can buy strawberry Nesquik pods for coffee machines now. I saw them in a shop the other day and thought to myself why??

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Replying to lesley.barnes:
Hallerud at Easter
By DJKL
13th Nov 2019 15:50

Like climbing Everest- because it is there (they are available)

I always liked synthetic banana flavour best and if enough icecream was added to a float, and it was cold enough, then who cares about the taste.

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Replying to lesley.barnes:
RLI
By lionofludesch
13th Nov 2019 15:53

lesley.barnes wrote:

You can buy strawberry Nesquik pods for coffee machines now. I saw them in a shop the other day and thought to myself why??

Pods are for peys.

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Replying to The Dullard:
RLI
By lionofludesch
13th Nov 2019 11:27

The Dullard wrote:

Being the first responder, who gave a simple answer - I have a reputation for being extremely helpful, and giving concise responses - I do agree that professional advice should be sought, largely on a project by project basis.

Plaudits due to Dulls - no doubt about that.

The Nesquik conundrum is probably a lot better than its Jaffa Cake counterpart.

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By fawltybasil2575
13th Nov 2019 13:03

@ Jon Dawson (OP).

A good starting point for you would the guidance from the renowned Les, from this parish, here:-

https://www.accountingweb.co.uk/community/blogs/leshoward/input-tax-the-...

After reading Les’s guidance, can I suggest your following the two links to the Taylor Wimpey cases, near the end, for guidance on the “Builder's block” items.

I must confess that, wishing to ascertain your status so as to decide the appropriate approach to trying to answer your question, I have read your profile. My doing so (with full respect of course) raises doubts in my mind as to whether you are employed by builders (as most previous eminent posters have assumed, and as appears implicit in your question); or alternatively whether you are an accountant posing the question as a proxy for a building company client [in view of your previous questions on AWEB indicating that you have (presumably accountancy) “clients”]. I appreciate that there are circumstances where such “proxy” approach is valid, but perhaps this is not so in this case. As an accountant in practice, one cannot be expected to be an expert in all aspects of VAT, and hence there is no shame in posing a VAT question outside one’s comfort zone.

Your liaising with a VAT specialist, and/or with an accountant with greater knowledge of the complexities of builders’ VAT, seems perhaps appropriate for you, moving forward [albeit, in THIS case, the first two responses above are extremely helpful).

Basil.

Thanks (1)
Replying to fawltybasil2575:
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By The Dullard
13th Nov 2019 13:20

fawltybasil2575 wrote:

albeit, in THIS case, the first two responses above are extremely helpful).

Yes. Spidersong (the most emminent VAT expert on AWeb IMO) can be incredidibly unhelpful at times, I know. ;)

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Replying to fawltybasil2575:
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By Jon Dawson
13th Nov 2019 17:12

Thanks for your help Basil.

I rarely use this site as I don't have the time. I work for a construction company (recently started).

I am still struggling a little to understand why I have come in for so much stick. Especially when the article you have pointed me to states that this is a complex area and that builders have long struggled with the complexities.

I agree that a VAT specialist may be appropriate, however, I would have thought a good starting point would be a forum such as this. I just don't understand why one person in particular didn't just answer the question and set me straight rather than just insulting me. Seems a little petty.

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