What is VAT and how does it work?

[Borchester]

I don't think stating that on an internet forum is a good idea.
Repo

It's up to the builder to pay tax to HMRC, not the purchaser. Paying cash is not illegal. Neither is boasting that VAT was waived by the supplier for paying in readies — after all, there's nothing stopping the chippie, electrician, plumber, etc, adding a bit to the quote in preparation for "conceding" a discount ...

As the builder who built my extension pointed out ....

By not registering for VAT in the first place, and asking the customer to order the materials separately ..... they can quite LEGALLY not charge you 17.5% (as it was)

Asking the customer to order the materials is usually a way for the builder to avoid hitting the VAT threshold, not necessarily paying the VAT.

Quite.

One of the younger members of the clan is currently weeping and wailing because he is in danger of earning too much. He is into computers and the end of the lockdown has shown that a lot of them are no keener to start work than most anyone else. So the orders are flooding in and he is worried that his revenues will exceed £85,000. Which means he will have passed the threshold and will be required to charge VAT, which in turn means that that he will be forced to put his prices up by 20%.

His mum said something on the lines of, you poor little sod, my heart pumps piss for you. But although it was in Yiddish which is a beautiful language for affectionate sarcasm, he does not appear to be overly consoled.

[johnofgwent]

It's up to the builder to pay tax to HMRC, not the purchaser. Paying cash is not illegal. Neither is boasting that VAT was waived by the supplier for paying in readies — after all, there's nothing stopping the chippie, electrician, plumber, etc, adding a bit to the quote in preparation for "conceding" a discount ...

I don't think HMRC or a judge would see it that way.

Yes they would. As long as HMRC collect something they are easy. And builders and lawyers head the bankruptcy stakes, so they have little love for HMRC anyway.

The trouble is Pappy, you are shit scared of all authority figures and end up being royally screwed by them.

furthermore, a vat registered trader has no legal duty to provide you with a VAT receipt for goods or services provided unless you are yourself vat registered in which case you would demand one so as to claim back your input vat deduction.  And their declarations to HMRC are confidential, and not open to public scrutiny. So how would you know they acted as you suggested ?

What HMRC will do is examine what they are shown, take a view on the accuracy and completeness of the paperwork presented and go from there,

[Nick]

I don't think stating that on an internet forum is a good idea.
Repo

It's up to the builder to pay tax to HMRC, not the purchaser. Paying cash is not illegal. Neither is boasting that VAT was waived by the supplier for paying in readies — after all, there's nothing stopping the chippie, electrician, plumber, etc, adding a bit to the quote in preparation for "conceding" a discount ...

As the builder who built my extension pointed out ....

By not registering for VAT in the first place, and asking the customer to order the materials separately ..... they can quite LEGALLY not charge you 17.5% (as it was)

Asking the customer to order the materials is usually a way for the builder to avoid hitting the VAT threshold, not necessarily paying the VAT.

[johnofgwent]

I don't think stating that on an internet forum is a good idea.
Repo

It's up to the builder to pay tax to HMRC, not the purchaser. Paying cash is not illegal. Neither is boasting that VAT was waived by the supplier for paying in readies — after all, there's nothing stopping the chippie, electrician, plumber, etc, adding a bit to the quote in preparation for "conceding" a discount ...

As the builder who built my extension pointed out ....

By not registering for VAT in the first place, and asking the customer to order the materials separately ..... they can quite LEGALLY not charge you 17.5% (as it was)

[Good old]

I don't think HMRC or a judge would see it that way.

Do you have any case law to back up that assumption?
It seems unworkable for the law to want purchasers to ensure the relevant VAT is paid to HMRC...

It is unworkable. The law requires  VAT to be paid on the full amount charged. That's all. How that amount is reached is not in question. The questions start when you try to avoid paying twenty percent of the true amount collected. If the builder gives you a break it's in the price. He still pays twenty percent ,or else.

[papasmurf]

The trouble is Pappy, you are shit scared of all authority figures and end up being royally screwed by them.

I am not scared at all, honesty is the best policy. (I have been challenging authority all of my life, a characteristic I have inherited from my mother.)

I have seen far too many people get bitten on the backside by boasting about getting things on the cheap in public. (In some cases getting jailed for it.)

[Borchester]

It's up to the builder to pay tax to HMRC, not the purchaser. Paying cash is not illegal. Neither is boasting that VAT was waived by the supplier for paying in readies — after all, there's nothing stopping the chippie, electrician, plumber, etc, adding a bit to the quote in preparation for "conceding" a discount ...

I don't think HMRC or a judge would see it that way.

Yes they would. As long as HMRC collect something they are easy. And builders and lawyers head the bankruptcy stakes, so they have little love for HMRC anyway.

The trouble is Pappy, you are shit scared of all authority figures and end up being royally screwed by them.

[patman post]

I don't think HMRC or a judge would see it that way.

Do you have any case law to back up that assumption?
It seems unworkable for the law to want purchasers to ensure the relevant VAT is paid to HMRC...

[patman post]

Here's a better question

Why the f**k are we retaining a european union invented tax ?

Because it's an easily applied and collected tax. That's why so many economies use the similar VAT/GST/CT systems — nearly 170 of the 190 or so UN full members use it...

[papasmurf]

It's up to the builder to pay tax to HMRC, not the purchaser. Paying cash is not illegal. Neither is boasting that VAT was waived by the supplier for paying in readies — after all, there's nothing stopping the chippie, electrician, plumber, etc, adding a bit to the quote in preparation for "conceding" a discount ...

I don't think HMRC or a judge would see it that way.

[patman post]

I don't think stating that on an internet forum is a good idea.
Repo

It's up to the builder to pay tax to HMRC, not the purchaser. Paying cash is not illegal. Neither is boasting that VAT was waived by the supplier for paying in readies — after all, there's nothing stopping the chippie, electrician, plumber, etc, adding a bit to the quote in preparation for "conceding" a discount ...

[Borchester]

I have just the builders round. They gave an estimate and I asked for 20% off because I was paying in cash which is tax free.

I don't think stating that on an internet forum is a good idea.

Don't worry on it Pappy. If any questions are asked I will say that it was your idea. 

[Borchester]

∆∆∆
Interesting read:  https://hoa.org.uk/2019/05/pay-cash-to-avoid-vat/

Makes the valid point (if substantial or skilled work is involved) that there is a huge risk of not getting a receipt for the work so there will be no proof that builder, carpenter or electrician has done the work — and therefore no guarantee that if things go wrong they will come back to put things right...

This problem is solved by hiring someone you trust. Not someone recommended by Mumsnet or from a leaflet through the door, but the bloke you have been using for years and you got originally from the lady (women are as tight as duck's arses on these matters and always know a bargain) up the road.

Don't rely on receipts or contracts. If push comes to shove a bad tradesman will simply go bankrupt (how hard is it to set up a new company?) and leave you with a mega legal bill.

[papasmurf]

I have just the builders round. They gave an estimate and I asked for 20% off because I was paying in cash which is tax free.

I don't think stating that on an internet forum is a good idea.

[patman post]

∆∆∆
Interesting read:  https://hoa.org.uk/2019/05/pay-cash-to-avoid-vat/

Makes the valid point (if substantial or skilled work is involved) that there is a huge risk of not getting a receipt for the work so there will be no proof that builder, carpenter or electrician has done the work — and therefore no guarantee that if things go wrong they will come back to put things right...