Vat query

recipio

Can anyone explain the Vat rules on a newbuild for me ? If you engage a contractor to do everything he will buy the materials - some at 23% and some ( like concrete blocks ) at 13.5% vat. You pay him as the building progresses. Then at the end he presents you with a bill with 13.5% vat for the total cost. ?
Are you not paying Vat on top of Vat ? Of course the builder claims back his Vat so in effect you have paid it to him, ?
Fellas, I'm not being lazy - I have researched this but can't get a clear answer. What am I missing ?

Bonzo Delaney

recipio wrote: »

Can anyone explain the Vat rules on a newbuild for me ? If you engage a contractor to do everything he will buy the materials - some at 23% and some ( like concrete blocks ) at 13.5% vat. You pay him as the building progresses. Then at the end he presents you with a bill with 13.5% vat for the total cost. ?
Are you not paying Vat on top of Vat ? Of course the builder claims back his Vat so in effect you have paid it to him, ?
Fellas, I'm not being lazy - I have researched this but can't get a clear answer. What am I missing ?

Main contractor buys materials for round figure let's say 1230e incl 23%vat - less vat = 1000
Main contractor labour = 1000e
Main contractors subbie eg plumber = 1000

Main contractor invoices client for 1000+1000+1000 = 3000 + 13.5% vat which is payable to revenue
Total cost to client 3405
Contractor claims back 230e of vat on materials back from revenue
+ contractor is entitled to claim back vat on his day to day expenses it costs to run their business eg fuel , tools, motoring, services. etc etc

recipio

Bonzo Delaney wrote: »

Main contractor buys materials for round figure let's say 1230e incl 23%vat - less vat = 1000
Main contractor labour = 1000e
Main contractors subbie eg plumber = 1000

Main contractor invoices client for 1000+1000+1000 = 3000 + 13.5% vat which is payable to revenue
Total cost to client 3405
Contractor claims back 230e of vat on materials back from revenue
+ contractor is entitled to claim back vat on his day to day expenses it costs to run their business eg fuel , tools, motoring, services. etc etc

Thanks for the quick reply.
I hadn't realised the contractor would submit a bill with zero vat on commodities.
Would that not mean revenue is allowing us to buy our materials at 13.5% ?
Can I ask where the 230 e is calculated - a lot of materials seem rated at 13.5% so he can't just get a blanket 23% refund. ?
I'm asking as Vat on a new build is a lot of money - a 200K build would cost 46K in Vat if applied at 23 % :eek:

Bonzo Delaney

The 230e is the 23% vat the hardware store charges the contractor on his 1000e purchase of materials. Total cost to contractor on the day of purchase 1230e.
The contractor then charges you the client 13.5% vat on their 1000e purchase (saving you the client 9.5 % if you were to walk in off the street and buy the material not been vat registered.)
Plus 13.5 % vat on their labour cost to install the material

The contractor then claims back the 23% on materials he was charged by the hardware supplier (230e on his 1000e material purchase) from revenue.
The contractor also claims back the 13.5% vat on what ever materials apply the 13.5 % vat rate. eg concrete.

Bonzo Delaney

vat to client from contractor is 13.5%

recipio

Bonzo Delaney wrote: »

vat to client from contractor is 13.5%

Thanks. So you save 9.5% on 23% rated goods but pay the full 13.5% on 13.5% goods. ? An architect will also charge 13.5 % ? What is the position with 'kit houses ' imported from the EU ? Is vat paid in the country of origin ?

ECO_Mental

recipio wrote: »

Thanks. So you save 9.5% on 23% rated goods but pay the full 13.5% on 13.5% goods. ? An architect will also charge 13.5 % ? What is the position with 'kit houses ' imported from the EU ? Is vat paid in the country of origin ?

Are professional feess are at 23% such as architects and engineers

recipio

ECO_Mental wrote: »

Are professional feess are at 23% such as architects and engineers

You are right - I now see that Architects/Engineers charge Vat at 23%.
A last query. If you use direct labour should the relevant tradesman be registered for Vat as well.? You are losing money if you try to buy the goods yourself at 23% ? Would a block layer/plasterer apply 13.5% as well.
If you can't claim any Vat back then you are really into paying Vat on top of Vat ?

Seve OB

Wouldn’t be much of a business man if he bought blocks for a grand and didn’t sell them on without any markup

Bonzo Delaney

Seve OB wrote: »

Wouldn’t be much of a business man if he bought blocks for a grand and didn’t sell them on without any markup

True..... but he's a good business man to know that's his bottom line and to walk away when the haggeling starts

recipio

Seve OB wrote: »

Wouldn’t be much of a business man if he bought blocks for a grand and didn’t sell them on without any markup

How much does that add to the price of a house. ? The contractor is just setting himself up as another middleman.? If he charges another 5% (say) on materials then your saving is only 9.5% + 5% using a vat registered contractor. You might as well buy a house from Germany where the vat rate is 17.5%

Bonzo Delaney

At the end of the day it's nothing to do with the client what way the vat works on their total invoice .
The bottom line is the bottom line cost wise no matter who the client engages for the job.
Whether they choose the cheapest or dearest contractor
Its the main crontractors sole responsibility to settle all vat due with revenue .
Whether on not the contractor applies a 0% or 100%mark up on the materials is irrelevant they will have to submit what it cost at source from the vat registered supplier to revenue.


Tldr : the bottom line incl vat is all that concerns the client.

recipio

Bonzo Delaney wrote: »

At the end of the day it's nothing to do with the client what way the vat works on their total invoice .
The bottom line is the bottom line cost wise no matter who the client engages for the job.
Whether they choose the cheapest or dearest contractor
Its the main crontractors sole responsibility to settle all vat due with revenue .
Whether on not the contractor applies a 0% or 100%mark up on the materials is irrelevant they will have to submit what it cost at source from the vat registered supplier to revenue.


Tldr : the bottom line incl vat is all that concerns the client.

You are correct. Sorry, I'm getting Vat rates confused with mark ups.It looks like you should have every single cost tied down before even turning a sod.?

Calahonda52

recipio wrote: »

You are right - I now see that Architects/Engineers charge Vat at 23%.
A last query. If you use direct labour should the relevant tradesman be registered for Vat as well.? You are losing money if you try to buy the goods yourself at 23% ? Would a block layer/plasterer apply 13.5% as well.
If you can't claim any Vat back then you are really into paying Vat on top of Vat ?

If you are at the end of the line in the transaction chain, otherwise known as on the hind t$t, you pay the VAT, which the contractor passes on to the Revenue.
If you are on the hind t$t, then whether you are reged for Vat or not is irrelevant because its not an input into your business so VAT is not reclaimable.

Eg I just bought an e-bike in my company via the ride to work scheme.
I get a small company tax break for the bike but I do not get to claim back the VAT in my VAT3 return