This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Self employed new build VAT

janelb1981
Posts:2
Joined:Thu Oct 30, 2008 12:47 pm

Postby janelb1981 » Fri Aug 08, 2008 2:11 am

Hi there
It would be fab if anyone could help me with the following;

My husband is a self employed builder and until recently he was not VAT registered. he has been doing a lot of new builds, and he is aware that they are VAT exempt. However, his brother is also self emplyed and has been VAT registered for a while. His brother supplied my husband with materials to be used in a new build in invoiced him plus VAT - is this correct, or as it was new build should the invoice have been without VAT?

My husband has now gone VAT registered but literally from the 1st of this month. this happened last month.

So... the real question is should my husband have been invoiced plus VAT for materials specifically to be used on a new build?

Any help would be really appreciated - thank you for your time

3pic
Posts:111
Joined:Wed Aug 06, 2008 3:44 pm

Postby 3pic » Fri Aug 08, 2008 4:56 am

The sale of a NEW build home is zero (0% VAT) rated (not VAT exempt). The sale of a USED/re-sale home is VAT exempt (no VAT charged - the difference being when VAT is not charged, no input VAT can be reclaimed).

The sales of a NEW home is zero rated so the zero rating relates to the sale of the house to a customer, not the construction. Any materials supplied in the construction of that property (bricks, windows, etc) will be standard rated at 17.5%

So the brother is quite correct to charge VAT on the supply of materials. Your husband registers for VAT, sells the NEW house at ZERO rate of VAT and reclaims any VAT he has incurred on the project (ie, Brothers materials costs).

Trust that answers the query and more importantly, prevents any brotherly disputes!

spidersong
Posts:352
Joined:Wed Aug 06, 2008 4:05 pm

Postby spidersong » Mon Aug 11, 2008 12:30 am

Just to clarify a point in 3pics post:
The zero rating does actually apply to the construction of a new home (VAT Act 1994, Schedule 8, Group 5, Item 2), as well as the eventual sale.

However this only covers any supply of construction services (i.e. carpenters, electricians, roofers, labourers etc.) and materials supplied WITH those services. Materials on their own are always standard rated. In this case it would appear this is purely a supply of materials and so charging VAT is quite correct.

janelb1981
Posts:2
Joined:Thu Oct 30, 2008 12:47 pm

Postby janelb1981 » Mon Aug 11, 2008 2:03 am

Thank you both for your answers - most helpful and appreciated.
My husbands brother does often provide labour alongside the materials (eg. digger driving of the hired digger, laying of the blocks etc.), so looking at your point spidersong, and googling that act! i guess in some cases the VAT should not have been charged.
My husband is not the seller of the property (he prices up and completes the jobs) for another contractor so it all gets confusuing at times!
thanks again
Jane


Return to “VAT & Excise Duties”