Forum

• # 118291
• Thu 09 Jan 2020 12:17 PM

Hi Everyone,  Just need a little help on this one please.

My client is a Limited Company who is VAT registered and is working as a sub contractor for a building contractor who is carrying out a new build and has confirmed that it is Zero Rated VAT.

According to my client when he needs materials for the job (he is a heating engineer) he tells the contractor how much it is and the contractor pays him the money for the full price (incl VAT).  The contractor doesn't ask for the receipts.  My client then bills the contractor for labour only and the contractor pays him less 20% CIS tax.

My question is: what happens about the materials?  Can/should my client claim back the VAT? Should he include the materials on his bill to the contractor and show the payment received.  If so should he charge the contractor standard VAT or Zero Rated VAT on the materials.  For some reason this is totally confusing me!!!

Thanks

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• # 118296
• Fri 10 Jan 2020 01:36 PM

Hi Tracey,

You may find the information at the link below helpful:

https://www.gov.uk/vat-builders/new-homes

My initial thought is that really it should all be going through your clients invoice as zero rated materials provided and potentially no one should be claiming back the VAT as this is 'blocked'. 

Do the materials go through the books or is it actual cash that is exchanged? If so, then it sounds like your client is just picking up the materials on behalf of the contractor and in this case he should pass over the receipt to the contractor.

If your client is using his own money, then potentially a VAT claim exists and a zero rated recharge for materials should be made to the contractor and CIS calculated just on the labour.

Not knowing the full circumstances it's difficult to provide any further guidance.

Hope the above does help.

Kind Regards,

Jaye

• Jaye Snell MICB PM. Dip, ACIPP

  Exe Bookkeeping and Payroll Services

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• # 118297
• Fri 10 Jan 2020 01:45 PM

Thanks Jaye

My client purchases the materials himself and tells the contractor how much it all cost incl vat and the contractor pays him through the bank.  The contractor says he doesn't want the receipts as it's all zero rated. 

So are you saying that on this basis my client could claim back the vat but should invoice the contractor for both labour and materials at zero rated vat (material charged at net value)?

Kind Regards

Tracey

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