Builder does not have LTD company

[SunflowerLV]

Hi,

I've had a builder come round to quote for renovating my house. He doesn't appear to have registered his business as a limited company as I can't find his business in the Company House register.

What does this mean to me if something were to go wrong during the build process and should it be a red flag?

Many thanks!

I don't think this is an issue. I would think checking he has the correct insurance is more important.

Thanks Marmitelover.

I did like him but feel nervous as I don't know the business history, financial background etc. I will be spending all of my life savings on this renovation so there is a lot at stake for me.

Is it unusual for a builder who claims to have been in the industry for over four decades to trade as a sole trader? He says he has a team of people that work for him.

Has anyone used a builder for a big project that was a sole trader?

it would be interesting to check if he has ever been declared bankrupt.

I don't know how to do that.

However you can search for him by name to see if he has been a director of a company that went into liquidation at companycheck.co.uk/search/results?SearchCompaniesForm%5Bname%5D=Piglet+John&yt3=

If he's a sole trader he's unlikely (although not impossible) that he's registered for VAT, which would mean that his annual turnover is under the threshold (c. £72,000 pcm iirc?). You don't say how much you're looking at spending, but say it's a project around the 20K mark he's not going to be doing many of them regularly, unless he's dodgy. His bread and butter is more likely to be small jobs, so I would ask for examples of his work if you're looking at major renovations. Most reputable builders will be happy to do this.

I'd also wonder how he can employ a number of workers and make a profit whilst remaining under the threshold but I'm suspicious like that. Not being a limited company or VAT registered isn't a problem in itself, but remain cautious.

VAT registration threshold is £81.000

A limited company means that if the company ends up in finanical trouble then people who he owes money to can only take the business assets not personal assests.

If a company is not limited and ends up in financial trouble and owing money then the people he owes money to can go after his personal assets like his house etc

Not being limited isn't a red flag. In fact, if he's a sole trader, he'd be easier to sue if something went wrong.

And it's pretty normal for builders to be sole traders and VAT registered. Plenty of reputable tradesmen are both.

Best way of protecting yourself is to get references, to use a contract, staggered payments and retentions. Also try to ensure as little change to the original plans as possible as this frequently leads to disputes.

And there's a difference between a quotation and estimate so make sure you know what he's given you.

If you're still worried, check that the address on his invoice ties into an actual physical place and isn't made up.

If you have a gut feeling don't ignore it.

Thanks for your replies.

He has given me a rough quote of over £100k for the building work which includes VAT. He will send through an official quote in the next few days so will check the address then.

Thanks PigletJohn for the link. It says he has had 3 resigned appointments and 2 appointments at 2 dissolved companies but currently no active appointments.

Hmm...not sure what to make of this. Wonder if I should ask him about it as currently he is in my shortlist of builders.

Check the insolvency history of the dissolved companies, if there's none, then he's not been involved with companies that are formally bust. Google the company names.

Prior involvement with limited companies isn't necessarily a bad thing. Plenty of business people are involved with several, particularly over a lifetime of trading.

But as with anything, you really need to see some work he's done before. And for that value of work, I would insist on a written contract.

Hi PeppermintCrayon. Both my husband and I really liked him. He came across very well. Very helpful and knowledgeable. Said he has been in the industry all his life.

It is only because we are considering using him that I thought I better check out his company.

Wonder if I am concerned over nothing. Traders that set up LTD companies can dissolve the business. It has unfortunately happened to me in the past over private language lessons, I put in a court order but after the owner dissolved the business I couldn't claim anything.

Big Lesson that I learnt - if it is possible to pay by credit card, always put some, even if it is just £1, of your purchase over £100 on credit card to get protection from section 75 of the consumer credit act.

Thanks everyone for your advice. I feel more reassured.

It is unusual though, I'd have thought, not to have a company set up when you're employing others and operating at this level? For tax reasons, if no other, I'd have thought he would. Plus yes, if something goes wrong it's his house, his finances on the line, which wouldn't be the case if he was trading as a ltd company. Which is actually better, for you, but risky for him.

Doesn't mean he's dodgy but it would make me think twice too - especially if you're talking about £100k worth of building works.

I'd ask him! See what he says.

Being a sole trader is not a cause for concern in itself.
Choosing to not have to file one's accounts publicly is a perfectly sane option for some people.

The Middleton family who run Party Pieces for example

If he is VAT registered and properly insured and his references check out, there is no hassle there.

The fact that he could save a stack of tax by being a Ltd Co is beside the point!

Follow through on the references and make sure they are genuine - perhaps see the work.

I've had 2 large building projects and here were my thoughts

• Fundamentally can he do the work, does he have enough experience?

• How much will he/his team do and does he subcontract trades?

• Will be give you a fair price for any extras - some builders price low and then charge for the extras/changes you have.

• Do I like him, get on with him? very important as you need to like talking to him. I've had some builders who will only speak to my husband.

• What will the payment schedule be - you tend to pay in stages or on a weekly schedule but it's important to not get too ahead with payments. I've learnt to value the work outstanding and determine what is left to pay. With the last build we owed the builder money at the end and this felt like the right balance as he was keen to finish. The 1st project the builder had most of the payments and he lost the incentive to finish up properly.It also lowers your risk if in the event the builder didn't work out you have budget left for someone else.

Lots of builders are sole traders or partnerships. He should be VAT registered. Mostly you pay in stage payments after work has been completed so you do not pay £100,000 all at once.

I am an accountant with quite a few builder clients.

They like being sole traders because then they can bullshit each other about how much / little they make.
If only the little darlings understood the difference between turnover and profit, my life would be much easier !

You can search for CCJs a person has by looking on www.trustonline.org.uk

If I was spending that type of money I would want to see the same job already done by him somewhere else.
I would like to know the people he uses also have done the job before.
It is amazing how many tradespeople sub contract work to others they don't know well and have no idea if they have done the job elsewhere.