builder VAT query.

[babybel]

I get this is kind of off topic but you all know your stuff & I'd appreciate some advice.

I'm doing up a house. It will cost around 200 k & take 4 months. The builder is my partner. We both own the house. He has 1 x business partner & is VAT registered.

I'm just trying to figure the most tax efficient way to do this. His accountant is useless.

Is this OK / optimum:

pay the business partner day rate + VAT.
don't pay my partner - why pay himself out of his (our) own money when he could just take what he needs.
buy the materials ourselves.

It's based on the following assumptions that might be wrong:

• Am I right in saying if his business buys 100k of materials, he will pay 100k + 20k VAT. THEN, charge us 120k + 24k VAT. Total 144k.
• Whereas if we buy materials direct, we only pay 120k.
• Are there any NIC / pension type implications to him essentially taking 4 months off & not getting paid.

Thank yoiu.

[SueEllen]

Don't pay any builder day rate. Pay them per percentage of project completed to avoid stringing out their time on the project.

[SueEllen]

Buy your own materials if they are going to be recharged.

[northernladuk]

A builder that doesn't know how to fudge VAT? I don't believe it.

[Lance]

A builder that doesn't know how to fudge VAT? I don't believe it.

Not a builder to trust then.

Most builders do the materials as VAT registered. And just enough of the labour that they want to pay tax on.
The rest is cash and not VATable.


Disclaimer .....
That’s tax evasion.

[WTFH]

• Am I right in saying if his business buys 100k of materials, he will pay 100k + 20k VAT. THEN, charge us 120k + 24k VAT. Total 144k.
• Whereas if we buy materials direct, we only pay 120k.

Why would he want to charge you 120k ex vat, unless he is trying to make 20k (ex vat) profit from you?

If he buys the material for 100k + VAT and he wants to sell them to you at his cost price, then he sells them to you at 100k + VAT.

Or, to put it another way... he buys the goods for £120k including VAT. If he sells them on for £120k including VAT then he is doing it without making a profit.

Does that make sense to you?

[babybel]

vat on goods.

The builder is my husband. The money to pay for it all is ours personally. It's not a question of how he makes money out of me. We're both just trying to do this in the most tax efficient, legal way.

He is only newly VAT registered so is still learning.

If a VAT registered company buys goods at £100 from Jewsons they'll pay VAT also = £120. When that company then sells to me, don't they have to charge £120 + VAT? (144?). It would be easier for his company to buy the goods but I don't want to effectively pay VAT twice when I could avoid by buying myself. Unless I've got this all arse over tit?

[pr1]

If a VAT registered company buys goods at £100 from Jewsons they'll pay VAT also = £120. When that company then sells to me, don't they have to charge £120 + VAT? (144?). It would be easier for his company to buy the goods but I don't want to effectively pay VAT twice when I could avoid by buying myself. Unless I've got this all arse over tit?

they could charge you £1+VAT if they wanted, as long as VAT is charged the net amount is between you and the builder to negotiate - in this case, he should just charge you the £100+VAT

[Alan @ BroomeAffinity]

The builder is my husband. The money to pay for it all is ours personally. It's not a question of how he makes money out of me. We're both just trying to do this in the most tax efficient, legal way.

He is only newly VAT registered so is still learning.

If a VAT registered company buys goods at £100 from Jewsons they'll pay VAT also = £120. When that company then sells to me, don't they have to charge £120 + VAT? (144?). It would be easier for his company to buy the goods but I don't want to effectively pay VAT twice when I could avoid by buying myself. Unless I've got this all arse over tit?

Please don’t misunderstand me but these are fundamentals that you are missing here. If you don’t know this then there is a very real concern that you don’t know a lot more. I appreciate that your husband is just learning but he should get professional advice, and soon. A naive builder is seldom a successful builder.

[MBA]

The builder is my husband. The money to pay for it all is ours personally. It's not a question of how he makes money out of me. We're both just trying to do this in the most tax efficient, legal way.

He is only newly VAT registered so is still learning.

If a VAT registered company buys goods at £100 from Jewsons they'll pay VAT also = £120. When that company then sells to me, don't they have to charge £120 + VAT? (144?). It would be easier for his company to buy the goods but I don't want to effectively pay VAT twice when I could avoid by buying myself. Unless I've got this all arse over tit?

If a reseller buys something for X + VAT and then sells it on without markup on they'd sell it for X + VAT - for them VAT is a pass-through amount. If someone tells you that they have to charge VAT on a gross amount they are simply trying it on.