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Vat Notice 708 subcontractor

23rd May 2017
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Sorry but this is a vat specific query! We are a construction firm and have been subcontracting on a building that we have recently found out falls under notice 708. The customer has not provided a certificate. The contractor has just asked for all 20% vat invoices raised to date to be credited and reissued with the 5% vat rate as the contractor wouldn't be allowed to reclaim any vat at std rate, so would be liable for 15%.

I have trudged through notice 708 and 17.4 states (subcontractors).."must always standard-rate your supply when working on a certificated building". However this doesn't seem to agree to section 8.4... "you can reduced-rate any works of repair, maintenance (such as redecoration), or improvement." Would you say 8.4 is relevant to contractors and 17.4 to subcontractors?

I guess my point is should the whole supply chain be issuing 5% invoices (we would do this for zero rated new builds)? And if vat returns have already been issued (luckily ours hasn't) changing invoices will cause all sorts of problems for some subcontractors won't it? Also should I be insisting on seeing a certificate from the customer before I change my vat rate?

Can anyone see any other issues with this that I am missing? Thanks in advance.

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By Les Howard
24th May 2017 20:06

Sub contractors can use the reduced rate for an eligible project which relates to domestic dwelling(s). But not for RRP or RCP projects. Certificates are not required for dwellings. Para 17.4 refers to RRP or RCP projects, for which certificates are provided. Further, the wording in the certificate in para 18.1 is not correct.
I always recommend more detailed advice for such projects, as often projects which are eligible for the reduced rate frequently include specific elements which are standard rated, meaning an apportionment is required.

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