Splitting Labour and Material

Binthere said:
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.
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Binthere, you are obviously more clued up than me on this and it has been a while since I checked for any changes but the payment application system is another thing I have never really understood. I have been asked loads of times to sign a self billing agreement but I like to keep it simple, price it build it and bill it, end off. They don't like me but eff em. You say it's to soften the sub contractors liability but when I signed up for vat I chose it not to become liable until payment is made as opposed to when the invoice is raised, does everyone not do that? Also, vat is national, Scottish law makes no difference.
 
Thats what i do AOM i put VAT on everything if they dont like it then they can explain to my accountant why they should not pay VAT .
 
It can be a bit of a nightmare though explaining to some poor old geezer his vat certificate means nothing to me as he thinks I am trying to rip him off. These things should be simplified to as you say everyone charge all the time and let the client argue with the vat man. I still reckon new builds are only part vatable though.
 
haha, you are so fekin right marra.:laugh:
 
I haven't charged vat on new builds ever.
Vat told me that I didn't have to.
 
Are you supplying material as well as labour?
 
You still have to charge vat on the Materials element mart62 , be very careful as you might get a large vat bill land on you door step because the VAT man will still want his share whether you have collected it or not.
This i was told by the VAT man and my accountant , we split it 70% materials and 30% Labour and charge the VAT on the 70%
 
Surely its up to the client to claim back vat. New builds are vat exempt but muddy waters for contractor. Bill as normal, clients accountant will sort.
 
Only the Labour element is VAT exempt on new builds Fred , still gotta charge it for materials.
 
Still, I would have thought the client gets it back,and you still bill it.:unsure:
 
Claim vat on all works. If the client has zero rating on his works he will be re-imbersed by HMRC all vat he has paid to you. Practice note 708 can give conflicting ideas but I am sure mixed supply contract scaffolding is still fully rated. As I have recorded before Bow Scaffolding was told not to claim vat on new build's then a few years later HMRC claimed back some £300k in unpaid tax (VAT). Needless to say Bow Scaffolding no longer exists.
 
Exactly my point Binthere , we do have one customer who insists we split there invoice Labour/Materials and its only because they give us so much work that i suffer it , but everyone else pays VAT on everything , like you say they just claim it back every quarter.
 
Im totally confused now lol we were originally informed by hmrc a few years back that we didnt need to charge on newbuilds as they were zero rated but normal vat on everthing else..we even had a revue meeting with a hmrc rep & our accountant as they wanted to check on our statuscdue to some rather largexrefunds coming our way...it is a grey area but only chargable if you charge for hire- we dont. The service we provide is free hire so therefore no need to split the invoices may seem crazy not to charge hire but it allows us to compete @a higher level against the big companies
As per notice 708 para 3.1.2 on the hmrc website
 
Sorry took so long to get back phil but just had btinfinity installed & spent the last hour masterbating to unbuffered porn lol.

Nope no hire m8. Only time is if a client wants a special in like a haki str tower etc & they get it charged prorata.
I learnt very early on in the formation of my company that the big clients dont want additional hire costs & prefer a fixd fee so thats what i give them.tbh i dont even bother doing little bob the builder jobs as theyre not worth the hassle
 
southernpoofter said:
Im totally confused now lol we were originally informed by hmrc a few years back that we didnt need to charge on newbuilds as they were zero rated but normal vat on everthing else..we even had a revue meeting with a hmrc rep & our accountant as they wanted to check on our statuscdue to some rather largexrefunds coming our way...it is a grey area but only chargable if you charge for hire- we dont. The service we provide is free hire so therefore no need to split the invoices may seem crazy not to charge hire but it allows us to compete @a higher level against the big companies
As per notice 708 para 3.1.2 on the hmrc website
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Please consider the following - HMRC 708 section 8.4 regarding scaffolding and hire.

8.4 What services can I reduced-rate?

Other than installing goods that are not building materials, you can reduced-rate any works of repair, maintenance (such as redecoration), or improvement (such as the construction of an extension or the installation of double glazing) carried out to the fabric of the dwelling.

You can also reduced-rate works within the immediate site of the dwelling that are in connection with the:
■ means of providing water, power, heat or access;
■ 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.

SP, I really do hope your not going to get screwed down the line by HMRC as Michael of Bow Scaffolding was.

The contracts director of Ballymoor tried the same on me several years ago and when he checked this back we were paid all vat owed. similarly with Gallyford and Scanmoor (now defunct)

Be careful with the taxman - get it all in writing.
 
Thx for the insite binthere i'll recheck with hmrc & the accountant obviously bow took the hit for similar & wouldnt want the same-talking specificilly about new builds there are 4 basic conditions reguarding zero rateing on new build -notice 708 - 3.4.2 states that if all conditions are met (708- 3.1.2)than zero rating can apply- so its only charged on hire so by not hiring but supplying a complete service than the criteria apllies for not charging.also look @ "VAT when constucting new houses & flats" on the hmrc website which includes a further 2 catagories of zero rated use of scaffolding.
The way we had it expained was if its a total new build & we were only hiring the materials out then standard rate applies but you can zero rate the erection & dissmantling on a new build but standard rate would apply to exhisting dwellings.
 
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