Paying VAT twice?

FrankHead

Hi,

I'm looking for some advice. I had a builder in to do an extension which went fine, however he also did some extra overs that were not covered with the initial contract.

the extras included things like getting fire doors, upgraded fire alarm & changing the boiler.

the agreement for the extras was that the builder would pay for the items & I would pay him back.

At the end of the build he gave me a break down of the extras - all the prices have VAT included in them. However at the bottom of the break down he the added all the prices together (including original VAT) and then added 13.5% VAT. Therefore I am paying VAT twice on everything. I know that he put all these items through his books so he has claimed the original VAT back and my portion of the original VAT will go to the government, but where does the extra VAT go? the government? his back pocket?

I have 3 questions,

1. as this was essentially a loan agreement, (he pays and I pay him back) can he add VAT?

2. Can you charge VAT on an item that already has VAT paid on it? he didn't add anything to it so surely Valued Added doesn't apply.

3. On his final breakdown of extras should it have been given to me as an invoice with price excl VAT and price incl VAT?

There is nothing in the final invoice about charging me for the service of him paying and me paying him back.

Any help would be appreciated

Thanks.

dbran

Hi Frankhead

This is just my opinion on this so take from it what you want.:)

I would suspect that this centers around what the original agreement you had with the builder was, what were the terms and price agreed.

If the agreement was that you wanted him to source and provide the fire doors etc then this in itself is a service that he has provided for you and I would think that it is quite acceptable for him to make a reasonable profit on this. I don't think you would be entitled to turn round and say it is a loan.

Having said that, the person has probably not done himself any favours by linking it in to the VAT as it makes things look wrong and underhanded to the customer.

In my opinion I do not think this is a VAT issue as he has accounted for VAT on the money he has received from you. (I assume he has correctly applied the 2/3 rule.) It is more of a "what did we agree at the start" issue.

Hope this helps


dbran

FrankHead

Hi dbran

thanks for getting back to me.

I sourced all the goods myself, when I told the builder where they were he said that he had an account at that builders providers and i could use it, he would pay for it and I could pay him back. The only thing that he did was make some calls and settle the bills.

At no time did he say there would be a charge for this or that he would be adding 13.5% VAT on at the end (which came to +2500 Euro)

I'm curious to know where I stand legally? can he add the VAT again on the whole cost even though VAT was paid on all the goods already.

Thanks again

Mick

dbran

Hi Frank

It then would appear then that you may have a case to argue with him over what you expected to be charged, the extent of the work that he did and the extent of the services he provided.

As for what he can charge you for VAT purposes, he can charge what he likes as long as he accounts for it correctly on the entire value of the sales income received. In this regard I do not see any VAT rules being broken. Moreover if he is putting the purchase through the books and claiming the VAT back, then he will also have to put the sale of the goods to you through the books also with VAT. If he is using his account with the builders providers, he will have to put it through the books.

It seems he is simply using the fact the there was VAT charged on the purchase to generate a markup for himself.
You best course is to get him to reduce the price according to what you expected it to be.

Kind Regards


dbran

FrankHead

The thing is all the extras have already been paid for by the builder, he paid the full price (incl VAT) for them and now he has added an extra 13.5%.

I don't mind paying the full price for the items and if he had said that he would charge me for this service then would have been okay.

Several times he told me (in front of witnesses) that he wanted to keep my costs down and that he would pay for the items and I'd pay him back.

At no time did he ever mention that he would be adding the 13.5% or that he wanted a fee for this service. If he had told me that he would be adding the VAT I would have told him that I wasn't interested.

I believe that he is using the 13.5 as his markup, (putting it in his pocket?) if he is passing it on to the revenue, he won't make any money from it. He gave me the prices for the extra overs as list on a piece of paper as an invoice. All the prices already include VAT so why include the extra 13.5%.

dearg lady

hmmm, if I'm understandin you correctly this is how I see it, he purchases goods for say 100+vat 21.5% he claims this vat back so cost to him is 100, ordinarily he would probably add on his own mark up and then charge the items to the customer plus vat (either 13.5 or 21.5 taking into account two thirds rule)
In this case he's offered to get these goods almost as a favour so I wouldn't expect a mark up for him(or else a very small amount) however, in selling them on to you, he would have to account for 21.5% vat, but not an extra 13.5 as well!

FrankHead

Hi dearg lady,

that's exactly it. he told me he would pay for the goods I could pay him back. to me that's a loan agreement, nothing more nothing less.

I wouldn't have minded if he had told me there was a charge but he lead me to believe that it was simply money owed to him,

Thanks

Mick