Home Improvement Quote – VAT Question
Discussion
Hello All,
Last month I accepted a VAT exempt quote for home improvement. Today I received a call saying that I must now pay VAT as the turnover of the company had breached £86,000. This applies to all customers from 1 November 2021. For me this £1,600.
The man on the phone said that he had two companies and my job is with the six month old company. The quote doesn’t have a VAT number but it does have a Companies House registration number which says incorporated on the 27 March 2019.
Does this sound legit? Should I proceed? What about deferring the work until April 2022, new financial year?
Last month I accepted a VAT exempt quote for home improvement. Today I received a call saying that I must now pay VAT as the turnover of the company had breached £86,000. This applies to all customers from 1 November 2021. For me this £1,600.
The man on the phone said that he had two companies and my job is with the six month old company. The quote doesn’t have a VAT number but it does have a Companies House registration number which says incorporated on the 27 March 2019.
Does this sound legit? Should I proceed? What about deferring the work until April 2022, new financial year?
When he gave you the original quote, did he explicitly state it was exclusive of VAT?
If it was exclusive of VAT, was it because he was not VAT registered at the time?
I would argue that if he quoted you £2,000 for a job on the basis that he would not be charging VAT, then the agreed total is £2,000. If he now has to account for VAT on the £2,000 income, that is his problem, not yours, and he cannot charge you the extra £400 cost that 20% VAT would create.
Instead, what he should do is charge you £1,666.67 plus £333.33 VAT - so the total cost to you remains at £2,000.00.
If it was exclusive of VAT, was it because he was not VAT registered at the time?
I would argue that if he quoted you £2,000 for a job on the basis that he would not be charging VAT, then the agreed total is £2,000. If he now has to account for VAT on the £2,000 income, that is his problem, not yours, and he cannot charge you the extra £400 cost that 20% VAT would create.
Instead, what he should do is charge you £1,666.67 plus £333.33 VAT - so the total cost to you remains at £2,000.00.
Not unusual where 'quote' is given way ahead of work in a growing company...
ultimately your choices are:
- pay the VAT extra
- cancel the work and find someone else who can do it who is still below the VAT level
- ask him whether you can share the cost (he is not making any more money, he is simply collecting the VAT and paying it off to the government)
his splitting his work across several businesses doesn't matter - if they are basically running the same trade, HMRC will aggregate their turnover for VAT registration purpose, so one company doing £90k or 10 each doing £9k - treated the same
ultimately your choices are:
- pay the VAT extra
- cancel the work and find someone else who can do it who is still below the VAT level
- ask him whether you can share the cost (he is not making any more money, he is simply collecting the VAT and paying it off to the government)
his splitting his work across several businesses doesn't matter - if they are basically running the same trade, HMRC will aggregate their turnover for VAT registration purpose, so one company doing £90k or 10 each doing £9k - treated the same
Eric Mc said:
saladdays said:
Was he VAT registered at the time he gave you the quote?Why is he saying "VAT Exempt"?
I've just learnt that once turnover exceeds £85,000 in a 12 month rolling period then VAT must be paid. The Quote is from October, when, presumably the company hadn't reached that figure.
saladdays said:
There's no VAT number on the quote.
I've just learnt that once turnover exceeds £85,000 in a 12 month rolling period then VAT must be paid. The Quote is from October, when, presumably the company hadn't reached that figure.
VAT is a bit more complex. I was going to e-mail you but you don't permit e-mails.I've just learnt that once turnover exceeds £85,000 in a 12 month rolling period then VAT must be paid. The Quote is from October, when, presumably the company hadn't reached that figure.
Surely if he believes his business is going to breach the £85k limit he should be VAT registered from the start..... and if he doesn't but subsequently believes he's going over he should register as soon as it becomes apparent.... or stop accepting new work.
It's not i've just gone above £85k and must charge VAT?
Two business's doing exactly the same type of work is just VAT fraud. One business doing building and another selling ladies undergarments is acceptable.
Either way, if he's quoted without VAT and subsequently becomes VAT registered then he should stump up the VAT bit or withdraw the quote.
It's not i've just gone above £85k and must charge VAT?
Two business's doing exactly the same type of work is just VAT fraud. One business doing building and another selling ladies undergarments is acceptable.
Either way, if he's quoted without VAT and subsequently becomes VAT registered then he should stump up the VAT bit or withdraw the quote.
He can’t have it both ways - the vat should only be added to the previous quote once any vat savings he makes from materials vat claimbacks is taken into account. Adding vat just to the labour/profit portion of the quote would be the most honest way of doing it. Then you start negotiating.
saladdays said:
The convention is, a supplier when dealing with a known non VAT registered customer, the price they quote unless specific attention is drawn to the fact the price is EX VAT, is deemed to be the VAT inclusive amount.So if the quote says £8,184 and on the front of the quote it is not clearly mentioned this figure is Ex Vat, then it is their problem and I guess perhaps they realise this.
DaveA8 said:
The convention is, a supplier when dealing with a known non VAT registered customer, the price they quote unless specific attention is drawn to the fact the price is EX VAT, is deemed to be the VAT inclusive amount.
So if the quote says £8,184 and on the front of the quote it is not clearly mentioned this figure is Ex Vat, then it is their problem and I guess perhaps they realise this.
I concur.. . If quote provided prior to registration but work commenced after vat registration, the amount quoted would have to become the vat inclusive amount (supplier makes a loss on job). Their mistake was to use the term VAT Exempt….should have been Excluding VAT. So if the quote says £8,184 and on the front of the quote it is not clearly mentioned this figure is Ex Vat, then it is their problem and I guess perhaps they realise this.
Regardless of VAT, quote and price technicalities, unfortunately the tradesman holds all the cards and if you don't accept and pay the new plus VAT price, then he will quickly replace you with other customers and you will be left looking for another supplier who will likely quote an even higher price.
Are you comfortable going ahead with the job after a dispute about the price, and do you think he would do a good job if his profit margin was reduced?
In the current climate of tradesmen scarcity I'd be inclined to either accept the higher quote with little complaint, or walk away and start again.
Are you comfortable going ahead with the job after a dispute about the price, and do you think he would do a good job if his profit margin was reduced?
In the current climate of tradesmen scarcity I'd be inclined to either accept the higher quote with little complaint, or walk away and start again.
Halitosis said:
Regardless of VAT, quote and price technicalities, unfortunately the tradesman holds all the cards and if you don't accept and pay the new plus VAT price, then he will quickly replace you with other customers and you will be left looking for another supplier who will likely quote an even higher price.
Are you comfortable going ahead with the job after a dispute about the price, and do you think he would do a good job if his profit margin was reduced?
In the current climate of tradesmen scarcity I'd be inclined to either accept the higher quote with little complaint, or walk away and start again.
Unfortunately I agree with this. Are you comfortable going ahead with the job after a dispute about the price, and do you think he would do a good job if his profit margin was reduced?
In the current climate of tradesmen scarcity I'd be inclined to either accept the higher quote with little complaint, or walk away and start again.
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