VAT rise - how to avoid when paying for works?

[Solo2]

Does anyone know what the situation might be with the potential VAT rise, when it comes to paying for extensive consrtuction works being done, over a 2 months period?

I'm at the start of paying a company for some works in our home, where the estimate is based on the current VAT rate. I think I heard that if a company raise an invoice now, for works to be done and paid for later, they might still be able to avoid charging the customer - ie me - that extra VAT amount. But I'm not sure about this.

I'm reluctant to pay the entire amount before works are carried out, in case they're not finished/ not done properly/ the company goes bust. But I also want to avoid the VAT rise as the works are going to cost a substantial amount as it is. Anyone here who could advise?

We don't actually know yet what the VAT-hike is going to be like or what the anti-avoidance measures are going to be like. Based on the previous VAT-rate changes then what you're proposing was possible, up to a specified amount (100k? not sure about that) if the work was done within 4 (I think?) months of payment. There's no guarantee that's what's going to happen this time around, though.

Also, if the work was done before the VAT rate change but the invoice wasn't issued until after then the supplier still had the option of charging the earlier rate of VAT. This was at their discretion, though.

As I said, this is what happened with the previous VAT rate changes and we don't really know if they'll be using the same system again.

www.hmrc.gov.uk/vat/forms-rates/rates/rate-changes.htm#2

This is a link to the HMRC which deals with VAT - this explains what should happen to sales that span a rate change. There is an additional link to give examples.

HTH

pay cash?

I'd suggest that you get a commitment in writing from the company doing the work that they will charge you VAT at the current prevailing rate before you give them the go-ahead. You may have to pay a bigger deposit in order to secure that commitment but it's better than paying in full in advance - never a smart move.

Thank you for all the helpful advice. I've first emailed the company and asked them what the position might be and am waiting to hear back from them. Hopefully we can strike some kind of deal and until the chnages come about, we'll not really know what might happen I suppose.

I think it is highly unlikely that any rise would take effect immediately so I would suggest dealing with the situation if and when it arrives.

Told you [smug]

VAT rise isn't until Jan 2011 so you should be fine if works completed by then