MCD AND Builder'ss Profit = 10% = Normal ?

Tuttlinghorn

We are half way through a build and budget's gotten v tight. We recently discovered that we are being charged MCD and Builder's Profit of 5 % each ie 10% total. We hadn't discussed MCD with Builder or Architect prior to this, hadn't even heard of the concept until the charge appeared. We spoke to Builder's QS who assures us this is normal practice as does our Architect ...
I had ( wrongly ) budgeted for tiles, sanitary ware, flooring to be charged at 13.5% VAT ... All wrong as they were in the quotation as 'to be supplied by client '
Any views would be welcome. Ideally I'd like to ask builder to buy the above items as he is also supplying and charging us for the labour to fit it. Should I expect to pay 10% to the builder for this (negating any VAT saving), or what's normal ?

Strolling Bones

MCD AND Builder'ss Profit = 10% = Normal ?

Yes it is.

But not as bad as you may think at first glance.

Lets take a box for ceramic tiles costing €123.00 in a retail store i.e. €100 + 23% VAT.

Contractors 10% is based on the ex VAT cost so he charges you
(100 + 10 %) + 13% Vat = €124.85.

You pay a little more.

But he is responsible for initial payments ( then waiting for stage payment from you ) deliveries breakages etc.

Tuttlinghorn

thanks - i had read (on boards) about the 5% MCD just couldn't find mention of the other 5% of builder's profit.
As you describe the net result is similar in terms of overall cost to me and TBH I'm happier the money ends up with builder vs Revenue (..they get enough..)
annoyance was that no-one had explained this 10% so I feel more than a little burned. maybe its buyer beware..

Dardania

it should have been identified on the quote to you? And perhaps architect should have explained it to you, by the architect? Do you have your own QS?

Totally normal practice to charge these (otherwise you can go direct labour route, and have the headache of coordinating all the trades yourself...) - builders aren't non-profit organisations

The supply of tiles etc. by client vs by the builder - this to me speaks of the architect not doing their job to manage the scope - these items should be identified in advance I personally believe, so as to get the best value in the builder's quote, and make the most of him charging MCD

galwaytt

Tuttlinghorn wrote: »

We are half way through a build and budget's gotten v tight. We recently discovered that we are being charged MCD and Builder's Profit of 5 % each ie 10% total. We hadn't discussed MCD with Builder or Architect prior to this, hadn't even heard of the concept until the charge appeared. We spoke to Builder's QS who assures us this is normal practice as does our Architect ...
I had ( wrongly ) budgeted for tiles, sanitary ware, flooring to be charged at 13.5% VAT ... All wrong as they were in the quotation as 'to be supplied by client '
Any views would be welcome. Ideally I'd like to ask builder to buy the above items as he is also supplying and charging us for the labour to fit it. Should I expect to pay 10% to the builder for this (negating any VAT saving), or what's normal ?

In short, yes, although the amount individual builders may charge can vary.

If you budgeted based on you supplying them, but at the 13.5% rate, then I'm afraid the error is yours. This is why MCD and profit exists - otherwise, why would a builder get involved ? - nobody can (afford) to work for free.

Tuttlinghorn

Dardania wrote: »

it should have been identified on the quote to you? And perhaps architect should have explained it to you, by the architect? Do you have your own QS?

Totally normal practice to charge these (otherwise you can go direct labour route, and have the headache of coordinating all the trades yourself...) - builders aren't non-profit organisations

The supply of tiles etc. by client vs by the builder - this to me speaks of the architect not doing their job to manage the scope - these items should be identified in advance I personally believe, so as to get the best value in the builder's quote, and make the most of him charging MCD

agreed it should have been explained, maybe some others will read this and know to proactively ask this question. We don't have our own QS, Architect had one to help us estimate cost of the job and compare initial tender responses.
As for supply of tiles etc, we were so far from knowing what we would actually want to buy and associated budget that it didn't make sense at the time.

Tuttlinghorn

galwaytt wrote: »

In short, yes, although the amount individual builders may charge can vary.

If you budgeted based on you supplying them, but at the 13.5% rate, then I'm afraid the error is yours. This is why MCD and profit exists - otherwise, why would a builder get involved ? - nobody can (afford) to work for free.

thanks all your response. My expectation for the builder 'getting involved' in e.g. tile purchase is because they will supply the labour to fit it .. I can however understand they need to front the money to purchase materials - as well as manage materials onsite, have someone available to check deliveries etc. Unfortunately there was a problem with windows delivered and the builder had accepted them - and final payment was taken on delivery. We are now being charged for the labour needed to remediate and install the windows (while builder and architect pursue the window supplier for that money). I guess that is different to a 'breakage'

Am I right in thinking that the builder also will be paying 23% VAT when purchasing, and will subsequently reclaim the 10% VAT?