Zero rated vat
- Thread starter HatterScaff
- Start date
Martin, can you prove you have been told by HMRC your activities will be exempt from VAT? If you can then all's well.
If you can't they may return with a bill for the unpaid 20% payable immediately. If this happens and you do not have the funds you will need to call in the administrators.
I have seen so many companies closed this way in the past decades, contract scaffolding always attracts standard rate VAT.
Builders can claim back all VAT paid on zero rated works, scaffolders cannot.
If you can't they may return with a bill for the unpaid 20% payable immediately. If this happens and you do not have the funds you will need to call in the administrators.
I have seen so many companies closed this way in the past decades, contract scaffolding always attracts standard rate VAT.
Builders can claim back all VAT paid on zero rated works, scaffolders cannot.
Sorry didn't see this reply. I have no proof from hmrc, only verbal telephone calls. I have re-claimed some of the vat from builders already. Its just the self builds etc...where I wont be able to get any vat from. Thanks for the reply.
philliosmaximus
Moderator
Souther Poofter on here is the man to talk to regards VAT as the poor man has just been through hell with them on this very subject and knows the full ins and outs ,
In the end it's all about cashflow. Housebuilders do not get paid until the houses are sold so to keep in business they need value for every penny spent. Not difficult to understand. As VAT is zero rated on new build homes but standard rated on scaffolding you can see the dilemma. The VAT rules allow a leeway, but in austere times the exchequer will try to pull in every tax penny it can. The rules do state that VAT is standard rated on the hire of scaffold materials and the labour cost of erection,dism and adapting. ANY standard rated supply to a zero rated site has to be paid but the contractor can offset this against his next quarters tax bill. This does mean that the contractor is temporarily out of pocket and has to correctly account for the sums being reclaimed from HMRC. Companies like Berkeley Homes ask us for a separate vat invoice covering the vat added to each sub-contract payment they issue, for instance, to correctly account their rebate being claimed from HMRC.
With a different contractor I once dealt with he would pay all the vat for the last quarter one week before his vat due date and claim this rebate off his tax bill minimizing his cash flow deficit while conforming to tax rules.
No-one wants the hassle of their company accounts being frozen while the HMRC accountants troll through all your business records and start asking innocent questions that prove to be difficult to answer (yes I have done this more than once).
Again my only opinion is to claim and pay the full tax and sleep well at night.
With a different contractor I once dealt with he would pay all the vat for the last quarter one week before his vat due date and claim this rebate off his tax bill minimizing his cash flow deficit while conforming to tax rules.
No-one wants the hassle of their company accounts being frozen while the HMRC accountants troll through all your business records and start asking innocent questions that prove to be difficult to answer (yes I have done this more than once).
Again my only opinion is to claim and pay the full tax and sleep well at night.
S
southernpoofter
Guest
I'll put a post up in the next couple of days & its gonna be a long one - basically hmrc have employed 20,000 new non compliance officers in an attempt to fill a 3 billion deficit & they are solely aimed at SMEs in the building industry - in my local area i know of 4 that i have spoken to that have been hit with massive payments & tbh the frustrating thing is its from following notice 708 -4:3:2.
We were looking at a bill of over 100k - & are just about to settle at 10.5k- as well as our large legal & admin costs - tbh HMRC kinda make it up as they go along & theres fcuk all you can do about it
We were looking at a bill of over 100k - & are just about to settle at 10.5k- as well as our large legal & admin costs - tbh HMRC kinda make it up as they go along & theres fcuk all you can do about it
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I know it's a burden sp but charge the standard rate for the full supply and pass it on to the HMRC in due time. HMRC will still do regular checks of your accounting but at least you will not have a fight on your hands every 18 months.
Also using the 'payment application' system helps to distance you from tax litigation.
The building industry is a tough business to make a living in nowadays, with employee training, H&S and the logistics of servicing your clients needs, we none of us need the added hassle of an ongoing argument with HMRC.
Also using the 'payment application' system helps to distance you from tax litigation.
The building industry is a tough business to make a living in nowadays, with employee training, H&S and the logistics of servicing your clients needs, we none of us need the added hassle of an ongoing argument with HMRC.
philliosmaximus
Moderator
We just explained it to yo mate ,
New build is zero rated but only on the labour element
---------- Post added at 07:19 PM ---------- Previous post was at 07:19 PM ----------
We just explained it to yo mate ,
New build is zero rated but only on the labour element
New build is zero rated but only on the labour element
---------- Post added at 07:19 PM ---------- Previous post was at 07:19 PM ----------
We just explained it to yo mate ,
New build is zero rated but only on the labour element
HatterScaff
Well-known member
its such a feckin grey area, just charge it all and make them claim it back through their own system
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Have you not resolved this issue with HMRC yet Martin?
HatterScaff
Well-known member
Please take care. HMRC are approaching a number of scaffolding contractors and arguing that the supplies made to housebuilders cannot be wholly zero-rated.
They argue that some part of the charge to a housebuilder must be for the hire of the scaffold itself which must be standard-rated. It is not safe to completely zero-rate a housebuilding contract. The invoice should be apportioned between hire and erection/drop and each element separately charged to a different rate of VAT.
Alternatively the whole contract should bear standard- rate VAT which the housebuilder can recover in full.
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They argue that some part of the charge to a housebuilder must be for the hire of the scaffold itself which must be standard-rated. It is not safe to completely zero-rate a housebuilding contract. The invoice should be apportioned between hire and erection/drop and each element separately charged to a different rate of VAT.
Alternatively the whole contract should bear standard- rate VAT which the housebuilder can recover in full.
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hi mate...sorry for the delay in answering. yes all resolved now. i had to get in £18k of vat from my customers. luckily most of them paid apart from the self-builders. luckily i held my ground and only put 5% materials/hire down for self builders so not so bad. 30% materials/hire for normal contractors.
I know of a company who has gone into administration because of this and just going to start up again.
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Mart62, Thank you for the update as this thread could serve as a reference point for other small scaffolding companies that fall over the same hurdle.
As I have said many times before, VAT should always be claimed and paid on contract scaffolding. The builder will be claiming it back from HMRC - the scaffold contractor is expected to pay the tax irrespective of collection.
Over the next few years the UK exchequer will be under pressure to recover as much tax as it can, this will be one source it will look closely at. Be careful to collect the proper amounts as I think this will become more common.
Glad to hear you survived the ordeal, always think back on it as a giant learning curve.
As I have said many times before, VAT should always be claimed and paid on contract scaffolding. The builder will be claiming it back from HMRC - the scaffold contractor is expected to pay the tax irrespective of collection.
Over the next few years the UK exchequer will be under pressure to recover as much tax as it can, this will be one source it will look closely at. Be careful to collect the proper amounts as I think this will become more common.
Glad to hear you survived the ordeal, always think back on it as a giant learning curve.