Building materials and VAT

just do it

afterburn1 wrote: »

Sorry I never said it's a dormer. There's nothing to stop me buying the materials a mile down the road surely!

In RofI Vat rate for joe public is 21% and 13.5% for builders. It's not always necessarily cheaper to source it yourself. Builders will also get preferential rates from suppliers.

Don't know how it works up North.

sundula

just do it wrote: »

In RofI Vat rate for joe public is 21% and 13.5% for builders. It's not always necessarily cheaper to source it yourself. Builders will also get preferential rates from suppliers.

Don't know how it works up North.

VAT rate on materials is 21% (soon to be 23%) for everyone, VAT rate of 13.5% applies to services/labour.

Troy McClure

sundula wrote: »

VAT rate on materials is 21% (soon to be 23%) for everyone, VAT rate of 13.5% applies to services/labour.

Yes but Builders doing a build claim this back in full and charge the client 13.5% for the same materials. Wheras if the client bought them they pay 21%(23%) and cant claim. Thus throught a builder they will probably get the materials cheaper due to his buying power and you pay 13.5% in the end. If all this is passed on to the client is another debate.

sundula

Troy McClure wrote: »

Yes but Builders doing a build claim this back in full and charge the client 13.5% for the same materials. Wheras if the client bought them they pay 21%(23%) and cant claim. Thus throught a builder they will probably get the materials cheaper due to his buying power and you pay 13.5% in the end. If all this is passed on to the client is another debate.

The VAT rate that the trades man charge is based on the percentage of labour which would be at VAT rate of 13.5% versus the percentage of materials which would be at 21%. Im not sure the ratio, I think it was 1/3 2/3, if ratio of materials is higher then builder should be charging VAT at material rate. I have no doubt this rule is not always correctly adhered to. For example if a tradesman bought an oak staircase for €8k plus VAT at 21% and then spent a day fitting it in a house at lets say a cost of €600 plus VAT at 13.5% it would not be correct for him to invoice €8600 + 13.5% VAT, due to gap in cost of materials vs. labour he would be liable to charge VAT at 21%.

Builders still have to pay VAT, it catches up with them some where, provided they are not cowboys, so VAT is not some form of discount. If the tax man finds they are constantly refunding VAT to someone in the construction industry then that would set if alarms bells, Businesses should be paying more VAT than they cliam.

Troy McClure

I dont know about tradesmen but builders are not doing anything illegal when they do this as you seem to be implying. The trademen who are employed by a builder on a job will have the materials supplied to them by the builder. The biggest cost on a build to a builder will be the labour, then the materials he supplies for them.

muffler

The posts above have all been moved from the "Self Build Cost 2011" thread where they were dragging it completely off topic

sundula

Troy McClure wrote: »

I dont know about tradesmen but builders are not doing anything illegal when they do this as you seem to be implying. The trademen who are employed by a builder on a job will have the materials supplied to them by the builder. The biggest cost on a build to a builder will be the labour, then the materials he supplies for them.

Well if they break a rule then they are doing something illegal, provided they charge the correct VAT rate depending on the ratio. As I said must builders / tradesmen probably dont know anything about the VAT ratio but there is a law there and it doesnt distinguish between the carpenter or the primary contractor, the law relates to the charging of VAT on an invoice governed by the ratio of materials, currently at 21%, versus labour at 13.5%.

fm

there is a two thirds vat rule,so if a tradesman buys material for €60 inc 21% vat and is providing a supply of materials and labour service, they can charge 13.5% provided they charge a minimum €100(60 plus two thirds of it = 40) plus 13.5% = €113.5.Otherwise if they are only charging say €70 plus vat they have to charge 21% even if labour is involved.It means that the revenue will always receive more vat per transaction than the tradesman claims back.A lot of tradesmen have never heard of this rule but it's on the revenue site.This idea that it's cheaper to get material through builders etc is rubbish,it ensures that they get to supply you with material as well as the labour.

Carlow52

fm wrote: »

there is a two thirds vat rule,so if a tradesman buys material for €60 inc 21% vat and is providing a supply of materials and labour service, they can charge 13.5% provided they charge a minimum €100(60 plus two thirds of it = 40) plus 13.5% = €113.5.Otherwise if they are only charging say €70 plus vat they have to charge 21% even if labour is involved.It means that the revenue will always receive more vat per transaction than the tradesman claims back.A lot of tradesmen have never heard of this rule but it's on the revenue site.This idea that it's cheaper to get material through builders etc is rubbish,it ensures that they get to supply you with material as well as the labour.

The idea is right here but the actual math is wrong as u cant add a vat inclusive figure [60] to a vat exclusive figure [40] and then add vat to the combined: life is hard enough.:D

see here
http://www.revenue.ie/en/tax/vat/supplies/index.html

Thier example is
material 201 ex vat
all in pre-vat cost to client = 300

201/300 is greater than 2/3 so higher rate

material 200 => lower rate