Self Build - materials VAT

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Birroc

Registered User
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When doing a self build shouldn't the contractors buy the materials for the house as they only pay 13% VAT whereas I would have to pay 21% VAT ?

Many of the contractors I talk to that quote labour-only, want me to get the materials but I am thinking it would be better if they bought them and I paid for them....

am I wrong ?
 
The contractor would pay vat @21 % on materials and then charge you 13.5% on labour and materials . But then it would not be a direct labour self build, it would be a conract to build and if he was involved with buying materials etc he would be entiltled to charge for this time .

"Cake and eating it" job here ?


Secman
 
everybody pays 21% on goods, a lesser fee of 13.5% applies to services provided. you shouldn't have to pay 34.5% on materials, i would question that. most builders stick on between 5% to 10% on materials to cover time sourcing and picking up stuff, etc. then they add the vat,
 
So I am better off buying the materials myself and just paying labour costs + the 13.5% VAT. Fair enough thanks.
 
Davy Jones, the vat rate applied by builder would be on the net value of Labour and materials, him having claimed back the VAt @ 21% on his inputs. Anyways OP has the idea now of direct Labour and the implications.

secman
 
Secman, if a builder buys materials worth 100 euro inc 21%, and charges labour at 100 euro, so the sub total bill is 200 euro. when they add the 13.5%, so total bill is 227 euro. the builder can claim back 21euro on materials. would it be right to assume that the cilent has paid vat twice on materials?
 
DavyJones said:
Secman, if a builder buys materials worth 100 euro inc 21%, and charges labour at 100 euro, so the sub total bill is 200 euro. when they add the 13.5%, so total bill is 227 euro. the builder can claim back 21euro on materials. would it be right to assume that the cilent has paid vat twice on materials?
Click to expand...
I think you are confused about what happens. There may be some builders who operate this way giving themselves no margin, but the majority would do something like the following:

Materials purchased 100 inc 17.35 VAT

Net Materials cost 82.65
Add Margin 10% 8.26
SubTotal Materials 90.91
Labour 100.00
SubTotal 190.91
VAT @ 13.5% 25.77
Invoice Total 216.68

VAT Return
VAT Charged to Customer 25.77
VAT Paid on Purchases 17.35

VAT Due to Revenue 8.32

HTH
 
So more expensive then to source your own materials....surely not.

Materials...Eur 100 inc 17.35 VAT
Labour......Eur 100 + 13.50 VAT
Total VAT paid on goods & services by customer.............30.85.


I think your calculations are incorrect, surely the contractor should pass on the 21% rate on the goods and charge 13.5% on the service.

VAT on Materials = 17.35
VAT on Labour = 13.50
VAT on Margin (13.5% of 8.26) = 1.12

Total VAT charged by contractor = 31.97

So then the VAT return should be
31.97
- 17.35
= 14.62 = amount of VAT customer paid = amount of VAT paid to Revenue.

Or am I missing something here....
 
mathepac's explanation is 100% correct assuming a 10% mark up on materials.

Secman
 
if the builder is a limited company, he can claim back the vat on any purchase against the vat he charges on service provided, so if he passes on this 21% he is making tan extra 21% profit
 
Don't forget there is a 2/3 law there , if the builder supplies material and the materials come to more than 2/3 of the final cost , he must charge vat @ 21% on everything. It is just another revenue generating exercise for the Revenue commissioners, ther builder does not gain.
 
bertie1 said:
Don't forget there is a 2/3 law there , if the builder supplies material and the materials come to more than 2/3 of the final cost , he must charge vat @ 21% on everything. It is just another revenue generating exercise for the Revenue commissioners, ther builder does not gain.
Click to expand...
Correct, thanks - my Mickey Mouse example above should have highlighted that.

I think the same rule applies to motor-trade work.
 
Speaking of the motor trade.....lets throw a spanner in the works :D Okay, that was bad but it's been one of those days!!

Just wondering what is the situation if your contractor buys materials in the North and legitimately takes them across the border VAT free? In this instance does he have to pass the VAT onto his customer for the product and/or service? If so, how much VAT since he hasn't paid any for the product?

Pudzer
 
The reason he didn't pay vat is beacuse he produced a vat registration number ( his own ) to the company in the North. There is an agreement cross border to do this. He still has to charge vat when he sells on the product @ either 21 % for sales only or 13.5% if the material content is less than 2/3 of the final price of the time & materials ( less vat)
 
The main reason i would see for a builder to get the client to buy the materials is in case he doesn't get paid, he then is only out his time. it is also easier for him to manage his cash flow.
 
bertie1 said:
Don't forget there is a 2/3 law there , if the builder supplies material and the materials come to more than 2/3 of the final cost , he must charge vat @ 21% on everything. It is just another revenue generating exercise for the Revenue commissioners, ther builder does not gain.
Click to expand...

That's mental !!!
 
Revenue want to avoid being scammed... otherwise people would do this..

FOLLOWING NOT ALLOWED
Materials = 100 + 21 (21 claimed back)
Labour = 10 (plus VAT)
Total = 110 + 13.5 VAT = 124.85 (14.85 VAT payable to Revenue, NET figure of 6.15 to be claimed back by service provider---- 21 claimed back - 14.85 due = 6.15 NET to be claimed)

MINIMUM LABOUR CHARGE by 2/3s rule.
Materials = 100 + 21 (21 claimed back)
Labour = 50 (plus VAT)
Total = 150 + 13.5 VAT = 170.25 (20.25 VAT payable to Revenue, NET figure of .75 to be claimed back by service provider ---- 21 claimed back - 20.25 due = .75 NET to be claimed back)
 
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