VAT - not the most interesting but you'd be REALLY helping us if you answer this PLEEEEZ!

[Slambang]

We had building work done in 2010 (when VAT was 17.5%). We paid the bill inc 17.5 VAT. But the final bill did not include some extras we'd had done as the builder was waiting for the subcontractor accounts to be returned. Now after A YEAR he has finally billed us a hefty amount for all the extras at the new VAT rate of 20%.

I think that we should pay 17.5% as it was work done and completed in 2010 even though the invoice did not arrive until Dec 2011 but I can't find any info on this. Does anybody know????

VAT is charged at the rate relating to which period the work was carried in it services received etc, so if the work was done in the period when it was the lower rate then it should be charged at the lower rate, regardless of when the invoice is raised.

Does that make sense? feeding ds whilst typing on iPhone .....

Depends when what the point of supply is - this can be date of invoice even if later than work being done hmrc guide

Thanks, Eclair. That's what I thought too. Ican't understand why the builder has charged 20%.

Gigondas what does the point of supply mean? Is that when they bring the stuff to the house?
(I can't work your link).

Although skimming through rules there can be an exception if long delay as in your case. Am not a vat specialist tho

Sounds like éclair knows what on about- link was just to basic info on vat and building work has loads of odd rules

Yes. I wondered about the delay. But we asked the builder repeatedly in 2010, then in Feb 2011 and again April 2011 for the final bill so it's definitely not us that delayed it.

Ooh, and thank you Gigondas and Eclair

I work in accounts and we pay vat at the rate when goods or services were supplied.

however, he can charge vat at 20% legally because I'm assuming the invoice date is during the 20% period. Either way is ok, but speak to him. His tax accountant will be able to advise him on how yo handle it through his books.

Right, Glaikit. So, as I understand he could charge us either the 20% or the 17.5% but he would have to put it through his books differently. I now need to convince him that he can do this legally, so if anyone knows of a handy cutoutnkeep guide I can show him that explains this to him I'd be evn more mightily grateful than I already am (which is lots!)

I'm on my phone just now but three is something on the direct gov website there. search for vat change.

Sales that span the change in rate

^There are special rules for sales which span the change of rate. If you provided goods or services before 4 January 2011 and raised a VAT invoice on or after that date you can choose to account for VAT at 17.5 per cent. You don't need to tell HM Revenue & Customs (HMRC) if you do this.
Services you started before 4 January 2011 but finished afterwards^

If you started work on a job before 4 January 2011 but finish afterwards you may account for the work done up to 3 January 2011 at 17.5 per cent and the remainder at 20 per cent. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.

from this page on HMRC website

Sorry italics fail there!! The first paragraph is what applies to you as the services were provided before the rate hike.

Really your builder should not have a problem about changing his bill, but some contractors think the VAT is their money, but it isn't, they are merely collectiong it for Mr Cameron and his croannies!!

You are a diamond Glaikit. Thank you.

What has he actually sent you, is it a VAT invoice or something else (a request for payment, (final) account, valuation etc.)?

If it is a VAT invoice, strictly speaking he cannot now change the rate of VAT and reissue the invoice, nor can he issue a credit note, so you will need to ask him nicely. If asking nicely fails, you can just pay up the lower amount and tell him you aren't paying the rest - he then has the choice of taking you to court for the balance, writing it off as a bad debt or reissuing the invoice.

If it is not a VAT invoice, it would be a good idea to point out that he currently has the option of charging either 17.5% or 20% at no cost to him, and that if he does crystallise the rate at 20% by issuing a tax invoice you are not going to accept liability.

For future reference, if anyone is having building work done and there is a VAT rate change coming up which is not dealt with by the contract it is a good idea to agree in writing how it will be dealt with before the change takes effect. If you cannot agree, set out your position in a letter and send it to the builder in case it ever comes to a dispute. If there are substantial sums involved you may want to take professional advice from an accountant as construction VAT is an area where there are many pitfalls for the non-specialist: VAT rate changes are a particular problem.