Splitting Labour and Material

philliosmaximus

philliosmaximus

Moderator
Joined
Jul 31, 2010
Messages
9,429
Reaction score
0
Location
London
We normally just invoice our customers without any splitting
but this customer is insisting that we split our invoice into Labour - Materials
is this normally based on a percentage ?
 
So keep the Materials % higher Hatter or does it not make a difference to my invoice just his VAT quarter ?
 
On a job with a long hire period some people want the hire cost staggered over the hire period rather than a 67% claim on erect and 33% on the dismantle.

It is rare, however.
 
We tell them its a contract price for labour & materials and we cant split, and that we have to charge VAT on both

Just to avoid problems further down the road
 
No its work on a couple of old Barns for a property maintenance company and will only be up for a few weeks , i dont ever recall splitting materials and Labour for any customers even the big building companys we work for

---------- Post added at 04:40 PM ---------- Previous post was at 04:39 PM ----------

So it is VAT related Hatter
 
1/3 labour , 2/3 materials is what i do or 33% of total price labour
 
The split is normally 30% labour 70% materials .
The vat is charged on the total price. All the split is for is the cis tax you dont get taxed on materials only labour.
 
how come you dont split for cost's eg drawing fuel or does that all come under materials ? if that makes sense 30% lab 60% materials and 10% cost

---------- Post added at 08:59 PM ---------- Previous post was at 08:58 PM ----------

how do you work your price out do you think of a figure and then say that it or work out how many man hours it will take and then multiply by 3
 
Told him we dont do splits , its a contract price so iam now waiting for a response to this , would love to win this job as its on a massive farm and there are trees , and grass and even animals there and it would be a nice week out for the lads :laugh: they will be sleeping like babies with all that fresh air.
 
As a rule of thumb I have noted that many of the larger scaffolding contractors work with 40% for labour cost including expences, 40% for O/H and various on-costs, 20% for materials and transport. These percentages can differ depending on the period of time on site and type of equipment that is erected.

Vat should not be an issue because irrespective of the tax status of the site all contract scaffolding, supply and fix, is standard rated by HMRC (all at 20% at the moment).

Below I have copied and pasted an extract of the standard letter I send to any building contractor who tries to muddy the water on what is a straight forward tax liability to them.

"Following a recent audit of our accounts by HMRC it was brought to our attention that Contract Scaffolding is always standard rated. We note from our records that we have not received VAT on the value of your payments received to date.

We must remind you that the supply of Contract Scaffolding is always fully standard-rated at 20%. All as described in HMRC Notice 708. (July 2002) Section 11. Paragraph 2. which states:-

“If your work is zero-rated or reduced-rated, then so are the goods, But you must always standard-rate goods that are not ‘building materials’.”

As contract scaffolding will not form part of the finished structure it is not classed by HMRC as building materials (Section 13. Paragraphs 1-8), thus it always has and will attract the full rate of tax."

Hope this helps a little.
 
Slight update to your good post binthere

HMRC Notice 708 Buildings and construction
November 2011
Page 52 of 120
• means of providing drainage or security; or
• provision of means of waste disposal.
All other services are standard-rated. For example, you must standard-rate:
• the installation of goods that are not building materials, such as
carpets or fitted bedroom furniture;
• the erection and dismantling of scaffolding;
• the hire of goods;
• landscaping; and
• the provision of professional services, such as those provided by
architects, surveyors, consultants and supervisors.
 
HatterScaff said:
Slight update to your good post binthere

HMRC Notice 708 Buildings and construction
November 2011
Page 52 of 120
• means of providing drainage or security; or
• provision of means of waste disposal.
All other services are standard-rated. For example, you must standard-rate:
• the installation of goods that are not building materials, such as
carpets or fitted bedroom furniture;
• the erection and dismantling of scaffolding;
• the hire of goods;
• landscaping; and
• the provision of professional services, such as those provided by
architects, surveyors, consultants and supervisors.
Click to expand...
Thanks for the update HatterScaff. Not had to use this letter in two+ years so may have taken my eye of the ball.
 
Mmm, I always charge VAT on a new build but mainly because I am trying to cover myself which seems is just as well as I always thought VAT was only charged on the material but not the labour?
 
aom said:
Mmm, I always charge VAT on a new build but mainly because I am trying to cover myself which seems is just as well as I always thought VAT was only charged on the material but not the labour?
Click to expand...
Building Contractors have the means to claim their paid VAT back from HMRC and do in large quantities. I have seen HMRC come after small scaffolding contractors in the past for vat that was not paid to them by the main contractor. Hence the use of the Payment Application system instead of tax invoices to soften the sub-contractors tax liability in the event of non payment.
I havent yet fully read through the 2011 changes to the Construction Act to see if it affects the way PA's are viewed.
Also, Scottish law might give a different view to the claiming of vat.
 
You must log in or register to reply here.
Top Bottom