Home renovation but VAT free

[AdaUserName92]

So we want to renovate our home and our budget is tight for the work required. We've had several quotes and they are pretty much the same. We've been offered to do the job VAT free by pretty much all contractors if we want more for out buck. We are hesitant as this is the first project for us and we are not sure if it is a good idea. What are the risks?

Isn't it just that these are small companies that don't bring in enough income to need to pay VAT? I don't think it necessarily means that they're doing anything illegal. I'm not an expert though.

It means they are offering to do it for cash. If a builder is VAT registered they have to charge VAT on every invoice and pay it each quarter. If you pay cash, you won’t get a proper invoice or any paper trail for the work. Makes it tricky if there are any problems and I wouldn’t do it for a big project like an extension.

But don't they have to earn enough to be VAT-registered?

Well yes, but I’m assuming the contractors OP has had in to quote are VAT registered otherwise they wouldn’t be able to add VAT on to their quotes in the first place. The VAT threshold is only £85k turnover and most experienced contractors should be turning over this amount (unless they are deliberately taking a lot of cash jobs to keep them under the threshold).

It’s often beneficial for builders to get VAT registered because the clients pay the VAT on the invoice and the builder can claim VAT back on materials and other expenses.

Well it's illegal, for a start. They can't legally be VAT registered and "offer" for you to not pay the VAT, that's not how it works. So do it by all means, but understand that you're participating in tax evasion and won't have a leg to stand on should anything go wrong with the job.