Builder causes VAT headache
AP writes: I have had some building work done, which was partly funded by a grant. In finalising the grant, I have been questioned about the builder’s VAT registration number and the VAT on the builder’s bills, which I am told may affect my claim. The VAT is a relevant cost as my business is not VAT registered. On enquiry to HM Revenue & Customs, I have discovered that the builder is not VAT registered. I have paid VAT on his invoices to the total of £8,000. I’d like the VAT back and my grant position resolved. What is my position?
The chances are that the builder should have been VAT registered and charged you VAT, even though your enquiries suggest he is not VAT registered writes Adrian Houstoun, VAT partner at Kingston Smith LLP. However HM Customs & Excise will therefore be interested in pursuing the builder for non-declaration of VAT.
The VAT registration threshold is currently £70,000, and based on the amount of VAT added to your bills it is reasonable to assume he should be registered for VAT. On this basis you are not out of pocket by the VAT you have paid, and you do not have a case for reclaiming the VAT back from the builder.
You will be out of pocket to the extent that your inability to respond to queries about the builders VAT registration restricts your grant claim. It will be worth taking legal advice to seek compensation from the builder for the amounts he has caused you to be out of pocket.
A detailed review of the grant terms is recommended to ensure that any adjustment to the grant claim is valid. Likewise, it will be worth reviewing the contract you have with the builder to see if there is any reference to VAT on invoicing.