Why Do Builders Quote Without VAT?
When working with contractors, it’s not uncommon to get a quote that doesn’t have VAT included. This can lead to a shocking revelation once you receive the final bill and see that the price is actually 20% higher.
Many people are displeased when this happens. But in reality, it’s the standard way of working with construction companies. And in some cases, it’s possible that you won’t actually have to pay VAT for the work. This is the case with new constructions, for example.
It’s standard practice
The simplest answer to the question is that it’s just the way the industry works. Builders are used to quoting their prices without VAT.
This also simplifies things to some extent. Some types of construction work are taxed at 0% VAT, but others aren’t. If you’re contracting a company for a more complex construction project, it may be broken down into individual components, some with VAT and some without. It can be messy to provide you with a comprehensive quote in advance in this case.
The builder’s company could still be small
It’s also possible that the builder is completely exempt from VAT to begin with. If the company hasn’t made a turnover of more than £85,000 in a year, they are not required to register for VAT. This also means that you’ll end up paying 0% VAT on their entire work.
This can be attractive, but it’s usually not the case when contracting a company for a larger project and you’re not their only client. In this case, reaching the VAT threshold can happen very quickly.
Is your construction a commercial project?
Another factor to consider is if you’re contracting the company as a private individual or in the name of your own company. If this is a commercial project paid by a company, you shouldn’t care about VAT in the first place.
You can just reclaim any VAT you’ve paid with your next tax declaration. You will just have to bear the cost for a few months until it’s time to file your taxes. But this requires the project to be ordered by an actual registered business.
Proper invoicing is very important in this case. You should ensure that the invoice contains both your VAT number and that of the contractor, among other things. Otherwise you may not be able to reclaim your VAT as HMRC will treat the invoice as invalid.
When in doubt, contact an accountant. If you’re running a business, you should already have one in most cases.