[Closed] Not VAT registered...

If he's not VAT registered then he can't/doesn't need to charge VAT on labour items, why would it be illegal?

Perfectly legal. I think the threshold is quite high now. I'm surprised someone who does lofts isn't though, given the amount of materials he'll be supplying. Is he getting you to purchase the materials?

I'm not VAT registered either.

Why doesn't every tradesperson de-register, then? I would think it would give a price advantage to them when quoting.

Sorry if I don't understand what it means to not be VAT registered...

Yes its "legal" once he stays below the turnover threshold. Slight word of caution though (from the wrong side - as it were - and this is from a few years back). It's "easy" to close a company and start up another once you approach the VAT threshold.

Downside for you is that 6 months later there may be a new company and no comeback. But that does sound "strange" in that industry (re materials).

Sorry if I don't understand what it means to not be VAT registered...

Put simply, you charge VAT on everything but the VAT you pay on materials etc gets subtracted from what you've charged, and you pay the difference to HMRC. It means you have to be tight on your books and make sure everything is paid up. If you're supplying a lot of materials, then it makes sense to be VAT registered, even if your turnover is under the threshold. If you're supplying labour only, then unless you're turning over £77000 or more, then it's simplest not to be. The threshold is your total turnover.

(it's slightly more complicated than the above, but that's it in a nutshell).

Oh and in the days when VAT was looked after by a different crowd to income tax, they used to say that while revenue would chase you with letters for a while, the VAT man would throw your arse in jail. It's still serious shit if you're late with VAT payments though. You CANNOT mess about with VAT.

Why doesn't every tradesperson de-register, then? I would think it would give a price advantage to them when quoting.
Sorry if I don't understand what it means to not be VAT registered...

Ahem.

£77k

I'm a small business but because I buy a lot of materials and use a lot of diesel, it's better for me to be VAT registered because although I charge my customers VAT, I can claim back the VAT I pay on everything I buy. Simples.

Why doesn't every tradesperson de-register, then?

depends on what your turnover is and who your customers are. You only [i]have[/i] to be registered if your turn over is over the threshold. If most of your customers are 'the public' and labour is a large part of your bill then it helps keep your prices more attractive if you can manage not to be registered.

If your clients are mostly registered themselves - i.e. you mostly supply other businesses then it its helpful to be registered yourself whether you are over the threshold or not as you can make some tax savings on your supplies and the tax you add to your bill is no disincentive to your clients.

For a long time it was only really plumbers that were VAT registered as they had the high turnover due to the cost of materials ie copper pipe. I'd guess that if it was a 1 or 2 man job they could keep costs down sufficiently between them. Or sub stuff onto other books.

How someone doing loft conversions cannot be vat registered is beyond me unless he gets client to buy the materials. If he is a one man band he'll need to be taking home half the Vat limit as his drawings to make it worth doing.i would think. Add a labourer, his materials and consumable plus tools and travel, insurance and to cover all that would see you very close to the limit especially as he wouldn't be able to claim back.input tax on his costs. It might just be work is thin on the ground so he has fallen under the threshold or it may be the cash economy. Cash economy is bad news imo. Operating outside the tax system in the words of the Trotters .....
No income tax
no vat
no money back
no guarantee

I.am stabbing in the dark on materials costs but guessing, timber, windows, interior finishes, insulation, tiles and waterproof will be part of it. sub contract isn't much help unless you are contracting direct. Then its you employing multiple parties, which is much less satisfactory. Forgot to say his income tax and ni would have to come out of that too.

Or maybe people are prepared to live with the risks of self employment for less reward than i think.

SaxonRider - Member
Why doesn't every tradesperson de-register, then? I would think it would give a price advantage to them when quoting.

you cant just de-register VAT.
You have to get your accountant to do this for you

and one of the builders said he was 'no longer VAT registered

Look at the price he's quoting and how long the job will take.... how many jobs like that can he do a year for under £77k?

you cant just de-register VAT.
You have to get your accountant to do this for you

Nope - you just tell HMRC, but you can only do it if you're below the VAT threshold.

There are only a few circumstances in which it makes sense to voluntarily register for VAT, one of which is if you're supplying other VAT-registered businesses.

As an accountant what has been said above should be ringing alarm bells for you. If he's buying materials, has any employees or hired help then he is either not declaring his income or hasn't traded very long to reach the turnover limit for compulsory VAT registration, in which case would you trust him on such a big job.
Continue looking round for someone you can trust and see their previous loft conversion.

Look at the price he's quoting and how long the job will take.... how many jobs like that can he do a year for under £77k?