I understand what you say SP, back in the 1970's-90's we used to split the charges for labour/ material with HMR&C agreement. But since the mid 90's they seem to have clamped down on the split rate with Scaffolding Contractors. This is where Bow (and a few others) fell foul. My advice is to get written agreement's because different teams may re-visit the accounts several years later.
Splitting Labour and Material
- Thread starter philliosmaximus
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It's not all doom and gloom, there are concessions depending on the size of your business. If you are supplying a labour and material service then the scaffold material element, not having been incorporated into the fabric of the finished product, is regarded as 'tools' by HMRC and the whole supply is standard rated.
Each site is different and you should assess them individually, as the tax collector you might be held responsible for any unpaid sum's.
crazynutta
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You don't pay CIS tax on materials
That is true cn. cis is a means of paying employment tax whereas VAT replaced purchase tax in the 1970's and was extended to cover service Industries, such as those to the building industry or foods sold in cafe's etc. It was initally set up to cover our payments to the Common Market (EU).
This thread is to do with the collection of VAT on zero rated construction sites however.
We are obviously getting very confused or just getting this very wrong, but we do the same as Phil. We are aware that new builds are supposed to be vat free but rather than getting tangled up in paperwork we charge it out at 100% VAT then leave it to the client to sort, we also have one client who insists on the split as apparently they can't always claim back all of what they have paid out which tells me they should be paying VAT in the first place.
SP, the VAT man told me, that we might be giving our client 4 weeks free hire but he isn't and he still wants his cut. You might not charge a weekly rate but there will be an element of hire charge in your invoice even though you don't show it, and the VAT man wants his slice.
I think my point is that any builder working on zero rated vat will have the mechanism to recoupe his paid vat, any scaffolder who fails to collect vat will be fully liable to the taxman for the missing tax with no mechanism for recovery. With the Bow Scaffolding Ltd example I mentioned it was 5+ years later the taxman demanded his split.
Best to stand your ground and charge vat letting the builder prove to you why he shouldent. (I'm betting that he can't).
Best to stand your ground and charge vat letting the builder prove to you why he shouldent. (I'm betting that he can't).
S
southernpoofter
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Wont he seeing the accountant till nxt wk but a brief annon call to hmrc today confirmed that my intrepretation of 708 was correct in the way we implement our invoiceing & vat chargeing system- its all down to hire, as long as theres no mention of it such as 4wks free then £££- ours actually state no hire charges then you can zero rate..but in the interim maybe bettertax may be able to put a new light on it.
HatterScaff
Well-known member
Charge VAT on everything, if its zero rated let the client reclaim it through their system
If you offer FREE or no hire, YOU are still responsible for the VAT element
the taxman wants his cut, even if you don't charge the client for it!
and as others have said, remember Gemini
Gemini Riteway Scaffolding Ltd (TC2053)
The taxpayer company was subcontracted to provide scaffolding for halls of residence at two universities. Haymills and Leadbitters were the main contractors.
In December 2007, HMRC visited the taxpayer and found it had not accounted for VAT on supplies made to the contractors, because neither had included VAT in the self-billed invoices they issued retrospectively to the subcontractor.
The VAT officer advised the taxpayer that, although the hire of scaffolding must be standard rated, supplies of erection and dismantling of scaffolding should be zero rated when the project was the construction of a university hall of residence. A fair and reasonable apportionment was required.
The advice was incorrect: under VATA 1994, Sch 8 group 5, zero rating only applies where such services are supplied ‘in the course of construction’. Only the main contractor makes supplies in the course of construction, a subcontractor does not and, as a matter of law, all its supplies should be standard rated.
The VAT officer suggested the taxpayer submit VAT-only invoices to the contractors, which it did, and passed on the VAT to the Revenue.
The officer then became aware of the error of his guidance regarding the zero rating of elements of the scaffolding, and realised VAT was due on erection and dismantling.
The tax was obtained from one contractor and paid to HMRC, but the other contractor had by this time gone into administration, meaning the taxpayer was unable to collect the extra tax through a VAT-only invoice.
HMRC said the VAT remained due and the taxpayer company was responsible for payment. The firm appealed.
The First-tier Tribunal sympathised with the business's predicament but said the problem originated from the taxpayer accepting incorrect self-billing.
Had one contractor not gone into administration, the VAT may well have been obtained, but this reason was not sufficient for HMRC to operate VATA 1994, s 29 and pursue the contractor, rather than the subcontractor, for the outstanding tax. The taxpayer should pay the VAT due.
The tribunal judge suggested it may be appropriate for the Revenue to take into account its officer’s incorrect advice concerning zero rating if the department decided to charge interest or penalties.
The taxpayer’s appeal was dismissed.
Independent VAT consultant Neil Warren pointed out two learning points from the case. First, ‘a supplier has the responsibility for getting the VAT liability right on all its income sources. It is not acceptable to rely on a customer, even where the customer is raising a self-billed invoice.’
Second, ‘in the case of a new charitable building, such as a church or new building for a relevant residential purpose, it is only the services of a main contractor that are zero rated, not those of subcontractors working for the main contractor’.
If you offer FREE or no hire, YOU are still responsible for the VAT element
the taxman wants his cut, even if you don't charge the client for it!
and as others have said, remember Gemini
Gemini Riteway Scaffolding Ltd (TC2053)
The taxpayer company was subcontracted to provide scaffolding for halls of residence at two universities. Haymills and Leadbitters were the main contractors.
In December 2007, HMRC visited the taxpayer and found it had not accounted for VAT on supplies made to the contractors, because neither had included VAT in the self-billed invoices they issued retrospectively to the subcontractor.
The VAT officer advised the taxpayer that, although the hire of scaffolding must be standard rated, supplies of erection and dismantling of scaffolding should be zero rated when the project was the construction of a university hall of residence. A fair and reasonable apportionment was required.
The advice was incorrect: under VATA 1994, Sch 8 group 5, zero rating only applies where such services are supplied ‘in the course of construction’. Only the main contractor makes supplies in the course of construction, a subcontractor does not and, as a matter of law, all its supplies should be standard rated.
The VAT officer suggested the taxpayer submit VAT-only invoices to the contractors, which it did, and passed on the VAT to the Revenue.
The officer then became aware of the error of his guidance regarding the zero rating of elements of the scaffolding, and realised VAT was due on erection and dismantling.
The tax was obtained from one contractor and paid to HMRC, but the other contractor had by this time gone into administration, meaning the taxpayer was unable to collect the extra tax through a VAT-only invoice.
HMRC said the VAT remained due and the taxpayer company was responsible for payment. The firm appealed.
The First-tier Tribunal sympathised with the business's predicament but said the problem originated from the taxpayer accepting incorrect self-billing.
Had one contractor not gone into administration, the VAT may well have been obtained, but this reason was not sufficient for HMRC to operate VATA 1994, s 29 and pursue the contractor, rather than the subcontractor, for the outstanding tax. The taxpayer should pay the VAT due.
The tribunal judge suggested it may be appropriate for the Revenue to take into account its officer’s incorrect advice concerning zero rating if the department decided to charge interest or penalties.
The taxpayer’s appeal was dismissed.
Independent VAT consultant Neil Warren pointed out two learning points from the case. First, ‘a supplier has the responsibility for getting the VAT liability right on all its income sources. It is not acceptable to rely on a customer, even where the customer is raising a self-billed invoice.’
Second, ‘in the case of a new charitable building, such as a church or new building for a relevant residential purpose, it is only the services of a main contractor that are zero rated, not those of subcontractors working for the main contractor’.
Thanks to Hatterscaff for the above post.
Remember even though you say there is no charge for the scaffold material you are erecting for any customer it will still be a mixed supply of labour and materials and standard rated on the whole for vat purposes. The figure zero is still a value - standing between positive and negative charges.
Remember even though you say there is no charge for the scaffold material you are erecting for any customer it will still be a mixed supply of labour and materials and standard rated on the whole for vat purposes. The figure zero is still a value - standing between positive and negative charges.