Tradesmen And Vat

[Louise07]

hi could someone help with this muddle im in. when a tradesman buys materials and pays via his account at trade price including vat as he is not vat registered, how does he then invoice his customer? he will add a percentage onto the trade price for profit. what does the customer invoice need to show in terms of vat? nothing as he is not vat registered? cost of vat charged in materials?

[Buenchico]

As he's not VAT-registered, there is no need for any reference to VAT on the invoice. He can simply show separate entries for 'parts' and 'labour' or (if he so chooses, subject to any agreement with the customer) just show a single inclusive price.

Chris

[CoffeeLounge]

If you buy stock/materials and you are not registered for VAT you still have to pay the VAT. When you invoice a customer you will still charge the customer the VAT on those goods but the service you provide will not be subject to a VAT charge but you will also still add on a profit. So for a carpenter his skills will be the service which he will charge for.

[ummmm]

You know that your local tax office runs business courses free of charge?

[buildersmate]

Explaining what the others said by way of example:
Job requires £100 of materials and 2 different tradesmen do the job each charging £200 for their labour, one VAT-registered, the other not.

Vat-registered tradesman pays £100 for the materials plus £20 VAT. On the customer invoice he shows, materials £100, labour £200, VAT (on the total of £300) is £60. Total price £360.
Non-VAT tradesman does the same but on the customer invoice he shows, materials £120, labour £200. Total £320.

The first tradesman later completes his VAT return showing £60 due to be paid to HMRC but offsets this amount by the £20 he has already paid the builders' merchant on materials. He pays HMRC £40.

Worth being aware that a few unscrupulous VAT-registered tradesmen have been known to show evidence to customers of their material cost purchases by way of material receipts but fail to deduct the VAT element before charging the customer for the job, onto which VAT is then added. Tradesman makes more money that way.

[Louise07]

thanks every your responses have made that clearer to me