Wwyd payment for work..

[TheLoverOfTea]

Hi, we have had a builder provide us with a written quote for some work. All agreed to go ahead however he has just sprung on us that he has now become vat registered which means we have an extra 20% to pay..this adds almost £1000 on to our bill. I'm not sure where I stand with this. WIBU to refuse to pay the additional amount? Is the builder being unreasonable asking me to pay an additional amount or should they just take it on the chin? I'm not too sure what my rights are..I just want it to be fair for all parties. I'm likely to go ahead with the builder regardless as I've seen his work...I just don't want to get taken for a ride!

He’s not pocketing the money for VAT, he’s paying it to the government. It means his business generates a certain amount which means he has to be registered to collect the VAT. He should have made it clear when he quoted for the job that VAT was on top, but he’s not ripping you off. Tax is tax and you have to pay it.

I would want to check that this was genuine, there've been a number of cases of traders including builders claiming VAT but not actually being registered, it's an easy scam. Have they quoted with the VAT number? You should be able to check if the number is genuine online. But if it isn't genuine then I'd go with another builder as they will likely find other ways to get extra cash out of you. If it is genuine then it is payable and it's up to you whether you go ahead most of the sole traders where we live are too small to be registered.

Of he quoted exclusive of vat you should have expected to pay the extra 20% anyway.

Speak to Trading Standards. I believe that anyone providing a quote to a householder, i.e. not a business, has to include VAT in their quote. However, it sounds as though he's told you before starting work, which is acceptable though disappointing as it adds to your costs. Do check he is actually VAT registered.

I would ask for a revised quote to include the VAT added on and his company's VAT number.

I would also point out that you agreed to this work based on the quote without the VAT, and obviously that wasn't included in your budget when agreed. It is quite a jump to go from £5000 to £6000, regardless of whether it's to the contractor or the taxman, you are still paying it!

The VAT he’s now adding to the quote should only apply to the labour element of the build plus any markup on materials he’s buying.

The VAT on the original cost of materials (to him) would already have been included in the first quote but now he’s VAT registered he’ll be able to claim it back so if he’s supplying a good amount of materials and saying it’s a 20% increase on the whole of the quote he’s already given you he’s pulling a fast one.

If it’s mainly labour then I’d Be finding another builder that isn’t VAT registered pronto.

Ah, good point Canyerjustfixthis. So if the original 5K quote was 2K labour and 3K materials (and assuming he was providing materials at cost and no mark up) then the OPs new bill should only be £400 more expensive than originally? i.e. now he is VAT registered he can claim back the 20% VAT (or £600) he would have had to pay on the materials at point of sale.

I would request the vat number and check it online

Just to clarify my previous post, anyone VAT registered needs to include VAT in quotes.

@Canyerjustfixthis can you just explain that to me? I'm not sure it's right? I think he has to add the VAT on to the bill on the materials too. He might be able to claim back but I think the householder also has to pay as a vattable supply and the householder can't claim back. Very interested as will make my extension much more affordable if you are correct......

Are you saying that the labour cost should have a deduction equivalent to the vat reclaim for materials?

@stupidboyman

You've misunderstood what I was getting at, as I understand it the OP got a quote from their builder before he became VAT registered therefore when he raised the quote the quoted cost (to the OP) of materials will have had the VAT included as the builder would have had to pay it @ point of sale, if he then becomes VAT registered at a later date and went to buy the materials he would reclaim his point of sale VAT and then charge his customer for the materials plus any markup as well as his labour and add VAT to the total.

eg. before my VAT registration - I quote you to supply a pack of screws, they cost me £12.00 including VAT (£10.00 & £2.00 VAT) and I want a £5.00 markup for my trouble (no VAT on this as I'm not yet VAT registered) so I quote you £17.00

At a later date when you ask me for the screws I then tell you I've recently registered for VAT so if you still want the screws that it'll be £17.00 plus VAT but now I'm VAT registered I can claim the original £2.00 VAT back although I now have to charge VAT on the whole amount so it now becomes £17.00 plus £3.40 VAT so it costs you £20.40. I pay the £3.40 to the 'VAT man' (HMRC) and the 17.00 is mine so for a £10.00 pack of fancy! screws I've now had £7.00 for my trouble

HMRC are now receiving £3.40 instead of the initial £2.00

@TheLoverOfTea If you want to stick with this builder then I would ask him to redo the quote and check the cost of materials are 20% (or thereabouts) cheaper

Ahh I see.