Beware VAT
Posted: 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.
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.