Beware VAT

Building a custom home in Cyprus
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MsMarie
Posts: 2
Joined: 08 May 2011 16:55

Beware VAT

Post by MsMarie » 09 May 2011 12:02

I would like to share our experience with anyone who is getting a builder to complete a home for them. Firstly always make sure you follow the plans he has and that any alterations or additions have prior planning consent. We ended up with an upper storey and garage for which there was no permission!

You will probably be handing over sums of money as the work progresses, maybe agreed contractually before a solicitor. These sums will or should include the VAT payments. Here is a big difference from UK. Although you are not registered for VAT, by instructing the builder you become his employer and the VAT payments will be required from you to be paid to the government, not from the builder. We made the mistake of paying the builder in full including the VAT, only to find that he was unregistered for VAT and had kept the payments. When we came to a sale, the VAT was required from us and despite having proof that the payments were made in full to the builder and included the VAT, we were held responsible and were even suspected of fraud and collusion with the builder to avoid VAT! We found it expedient to leave the country while a lot of money was spent on legislation in our absence to clear up the mess. We were fortunate in that the builder, under pressure, admitted he had received the money and paid up.

A cautionary tale..... we never went back.



Nigel Howarth
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Re: Beware VAT

Post by Nigel Howarth » 09 May 2011 15:00

Dear MsMarie - welcome to the forum and thank you for your cautionary tale - and I'm pleased to hear that your builder paid up.

We also built our house here and engaged a local architect to draw up the plans, obtain the permits, etc and eventually he oversaw the construction work.

One other point to note is that invoices should bear the supplier's VAT registration number if they are charging VAT.

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
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MsMarie
Posts: 2
Joined: 08 May 2011 16:55

Re: Beware VAT

Post by MsMarie » 09 May 2011 17:54

Perhaps I should also say that when work often ground to a halt because the builder could not pay his tradesmen and suppliers, we took over the supervision of the workmen and they presented their bills to us and we paid them and deducted from the final amount to the builder. Of course, the builder didn't like this and wanted this money to keep him going, but by then we knew the money would probably go on keeping his other projects afloat. We kept the tradesmen's VAT invoices and had no problem with these, it was just the stage payments to the builder. He should have issued us with VAT invoices, but as he seemed incapable of paperwork and spoke not a word of English, instead we issued him with our own prepared receipts for him to sign and kept photos of the cheques. When we made the first payment, our solicitor took this and paid off a mortgage on the land which was owed by the builder which we had not been made aware of but at least we did get the land deeds and officially owned a vineyard! However, she made no mention of the VAT at that time, nor at any time although it was for an amount which included VAT! Since it would appear she was acting for both sides, I guess we fell into just about every pitfall going ......

A happy ending was that he liked his house so much, he bought it back from us, planning difficulties and all!



Nigel Howarth
Site Admin
Posts: 2327
Joined: 24 Oct 2007 14:38
Location: Erimi, Limassol, Cyprus
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Re: Beware VAT

Post by Nigel Howarth » 09 May 2011 18:28

There are landowners who think they can 'mimic' the more professional developers building a house on their land. Many of these do not have a clue what they are doing or the ability to run a business.

One case I recall some years ago involved a property developer whose main job was a barman - he had as much knowledge of building houses as I have of brain surgery.

Anyone thinking of buying land and building a house to their specification should acquire the land separately and the go about getting their house designed using a good architect and then issue tenders for its construction. As I mentioned earlier, we had a house built to our design and specifications - and if you have the time and commitment, I would recommend the approach to anyone. Of course we had a couple of small problems along the way - you'd expect problems on any project - but nothing that couldn't be resolved amicably and we certainly didn't fall out with anyone or lose any sleep. We checked out six building contractors before we decided which one would get the contract and I have to say that he did an excellent job and came in on budget.

Even though you say you fell into just about every pitfall going, you eventually managed to come up smelling of roses.

You must have learnt a lot from your experience - you're not temped to try it again?

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
Read the latest Cyprus property news

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