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Where Taxpayers and Advisers Meet

0% VAT Construction Project

KC75
Posts: 4
Joined: Thu Jun 07, 2018 9:36 am

0% VAT Construction Project

Postby KC75 » Thu Jun 07, 2018 10:10 am

Hi

My electrical company (vat registered, ltd) recently started work on a new build project which has had a 0% vat rate applied to it. I have inspected the relevant documentation in the project contract, issued by the clients tax specialist, explaining why the 0% vat rate has been applied & i am satisfied that it is above board. I have received 1 payment so far and the payment certificate shows the vat rate as 0%, therefore no vat was added/paid.

My query is how should i be treating the vat, when entering the purchase invoices (materials, agency labour etc) onto my accounts system, related to this project? Should i be:

1. Entering the invoice as normal (net & vat figures, as detailed on suppliers invoice, in the relevant sections)

2. Entering the gross invoice figure in the net section and 0 in the vat section?

3. Entering the net figure in the net section and 0 in the vat section, therefore removing vat from all my suppliers invoices and only paying them the net values?

4. Something completely different.

Any help would be much appreciated.

Lambs
Posts: 1420
Joined: Wed Aug 06, 2008 3:15 pm

Re: 0% VAT Construction Project

Postby Lambs » Thu Jun 07, 2018 10:50 am

K,

You reclaim the VAT on your costs exactly as you normally would. You are charging VAT on your supplies, but at 0%, so you are perfectly entitled to reclaim the VAT on your costs (although you are obliged to pay your own suppliers their VAT, as normal - THEY don't care what the VAT rate is on the supplies that YOU make). If you ever made exempt supplies, then your own Input VAT costs would usually be at least partly restricted. But that is not what is happening here.


Kind regards,


Lambs

robbob
Posts: 2827
Joined: Wed Aug 06, 2008 4:01 pm

Re: 0% VAT Construction Project

Postby robbob » Thu Jun 07, 2018 12:01 pm

Ref the vat treatment of subcontractors.

You may want to dictate the vat rate that subcontractors charge you depending on the relevant rules as laid out by hmrc (see link to notice 708), this would be on the basis that if you claim input vat and the subcontractor later says - oh no that's a zero rate job things could get a little messy. Either way structure your agreements with subcontractors accordingly so both are hopefully clear at the outset as to vat rate that applies and both parties are happy with the vat rate being applied .


https://www.gov.uk/government/publications/vat-notice-708-buildings-and-construction/vat-notice-708-buildings-and-construction

2.1.1 Which VAT rate do I charge?
You must charge the lowest rate applicable to your supply.
Subcontractors are contractors who work to other contractors. For the most part they can zero-rate or reduce-rate their supplies according to the building being constructed or worked on, as noted at 2.1 above.

all invoices should be entered as normal, however if an invoice should not have input vat due to the fact that you should have been billed zero rated then Get the invoice amended by the supplier before entry onto your system.

KC75
Posts: 4
Joined: Thu Jun 07, 2018 9:36 am

Re: 0% VAT Construction Project

Postby KC75 » Thu Jun 07, 2018 2:51 pm

Many thanks for both replies, very helpful.

les35
Posts: 557
Joined: Wed Aug 06, 2008 3:09 pm

Re: 0% VAT Construction Project

Postby les35 » Thu Jun 07, 2018 3:04 pm

Sub contractors charge VAT at 0% if the project is a dwelling.
If it is a RRP (e.g: nursing home), then sub contractors will charge at 20%.

Lambs
Posts: 1420
Joined: Wed Aug 06, 2008 3:15 pm

Re: 0% VAT Construction Project

Postby Lambs » Thu Jun 07, 2018 4:27 pm

R,

Good point about sub-cons. I saw "supplier" but missed reference to agency labour.

Thanks and regards,

Lambs


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