Why include the VAT?

[Brown and Boris]

I have been working very hard to get a tender for a small government project under budget. Thing is, the budget of £13k includes the VAT.

I cannot think of any reason to have the budget VAT inclusive when as a Govt. dept they will simply reclaim it anyway? As a non VAT regsitered business that would give me the fuull £13k to work with. As I am VAT registered it leaves me just £11,300.

As it is simply a supply of labour job, I was thinking about sumbitting a proposal as an individual rather than a company as I may just be able to do it for £13K if I am careful. I know the VAT man will argue that if I am doing this kind of work as a Limited Company I cannot do it as a freelancer, but given the restrictions (and some degree of unfairness against VAT registered entities) caused by this VAT inclusive rule I wonder how miffed they would be as long as I declared it as income on my SA?

[StevieBee]

It's worth putting the question to the client. You often find that some content of tender specs are copied from others where the VAT rules become more complex and the procurement officers don't always grasp the significance of it - or fail to spot it.

[skwdenyer]

It is my understanding that they cannot reclaim it, that's why.

From the PoV of the VAT man, since your Ltd company and you are 2 separate "persons", that side of things doesn't cause a problem. However you might find that, by doing this, you are failing in your fundamental duty as a Director to act in the best interests of your company. If you're trading on your own account in the same sphere then you're introducing a clear conflict of interest which would be difficult to overcome.

Furthermore, are you sure that the tender regulations will allow you to tender as a sole trader? And are you registered as self-employed? Do you have any and all required insurances as a sole trader? And so on...

[Brown and Boris]

StevieBee said:

It's worth putting the question to the client. You often find that some content of tender specs are copied from others where the VAT rules become more complex and the procurement officers don't always grasp the significance of it - or fail to spot it.

I have taken it up with them. Apparently it is to do with funding sources and budgets. He wasn't entirely sure but bottom line is they have £13K, end of.

I managed to get it in just under the £13K by trimming my day rates. I actually showed the proper day rate in the tender and then showed it discounted so they didn't get the idea that would work for that in the future. In reality I think that this will have to go to a very small independent or an academic 'on the side' paying some resaerch student in washers to do the graft because for what they want done £13K is really inadequate ( £700k project and £13k for evaluation to include two iterations of lengthy interviews with representative samples of over 800 project managers)!

I may have to do it privately if we get the job as all but £1500 is labour, but I recall HMRC don't like this because you could effectively manipulate the taxation (for example to keep under the flat rate threshold).

Business wise, £13k is £13k we wouldn't have if I did it privately or not. I couldn't tender and get it under £13K with the VAT.