Setting up a ltd company for a selfbuild

lownhard

Has anyone done this to reduce vat liability? What are the potential drawbacks? Or more importantly, does the revenue view it as evasion?!

kilclon

I would have thought that this would be a clear case of tax evasion. Do builders not have to pay the normal rate of tax on their own houses?

lownhard

Builders/contractors pay appropriate rates of tax on goods and services (13.5% and 23%). They then claim back all the vat they paid throughout the process and charge 13.5% on the house they sell to you which they remit to the Revenue.

I was proposing to set up a contracting company that sells the house back to me and my wife at the end of the build with 13.5% vat charged on it.

The saving comes with the items that you pay 23% vat on. They would in essence be charged at 13.5%.

DOCARCH

As Kilcon alludes to what you are doing is not setting up a legitimate ltd co essentially...you are essentially setting up a ltd co for tax/VAT avoidance.

Revenuse can see through these kind of set ups and could potentially come back on you! I think the cost and hassle involved of setting up a ltd co, preparing accounts, closing it down, etc. may outweigh the benefits?

If it was that easy, everybody would be at it!

Even if going direct labour, get your subbles to buy materials for you...blocklayer to buy blocks, chippie to by timber, electrician to buy electrical stuf, plumber to buy plumbing/heating stuff, window supplier to install windows....etc., and you should only pay 13.5% VAT.

What's left that you might pay 23% VAT on might not be a whole lot?

...alternatively just get yourself a building/main contractor.

fclauson

Also with the upcoming change in regs are you really wanting to be the main contractor with all the liabilities this will carry

4Sticks

Indeed . Watch out for the death of direct labor in Ireland. Who shall mourn it's passing ?

massey265

fclauson wrote: »

Also with the upcoming change in regs are you really wanting to be the main contractor with all the liabilities this will carry

This is news to me, were can I find out more about such changes? Does the main contractor need to be certed to carry out works?

DOCARCH

massey265 wrote: »

This is news to me, were can I find out more about such changes? Does the main contractor need to be certed to carry out works?

......http://www.boards.ie/vbulletin/showthread.php?t=2056921361

lownhard

DOCARCH wrote: »

As Kilcon alludes to what you are doing is not setting up a legitimate ltd co essentially...you are essentially setting up a ltd co for tax/VAT avoidance.

Revenuse can see through these kind of set ups and could potentially come back on you! I think the cost and hassle involved of setting up a ltd co, preparing accounts, closing it down, etc. may outweigh the benefits?

If it was that easy, everybody would be at it!

Even if going direct labour, get your subbles to buy materials for you...blocklayer to buy blocks, chippie to by timber, electrician to buy electrical stuf, plumber to buy plumbing/heating stuff, window supplier to install windows....etc., and you should only pay 13.5% VAT.

What's left that you might pay 23% VAT on might not be a whole lot?

...alternatively just get yourself a building/main contractor.

Would the 2/3 rule not apply to things like flooring, tiling, plumbing, kitchen, appiances, electrics? ie the cost of the goods would make up more than 2/3 of the invoice and therefore goods that carry 23% would have that charged on them?

The company set up and accounts admin is not a problem. My wife is in the trade. Can be done at little expense.

It is establishing the legitimacy of the company that is important as you rightly pointed out. The company should have an employee to qualify for a vat number and that is the issue.

With regard to the new regs, am I right in saying that these will apply to builds commenced after march 2014? Is it not the certifier that will bear the liability from march 2014? I could be very wrong on that one...

4Sticks

Do not be fooled by the new regulations. They place a massive clear blue sea between the state and private individuals. Fast forward 20 years. Mr Self builder sells house to Mr New Owner.
Mr New Owner reckons he has bought a dud. Mr Builder is dead. Mr Certifier in Canada. Mr New Owners solicitor looks at the documents carefully maintained by the Local authority ( the only state function imposed by the new regs ) to see Mr Self Builders undertakings that he has made appointments of competent persons. Who gets sued then ?

DOCARCH

lownhard wrote: »

Would the 2/3 rule not apply to things like flooring, tiling, plumbing, kitchen, appiances, electrics? ie the cost of the goods would make up more than 2/3 of the invoice and therefore goods that carry 23% would have that charged on them?

I thought that might come up! I am aware of this rule, but, I have yet to see any company 'in the trade' abide by this! Even big/well known window suppliers? Not sure how they do it to be honest? I have asked in the past.

lownhard wrote: »

With regard to the new regs, am I right in saying that these will apply to builds commenced after march 2014? Is it not the certifier that will bear the liability from march 2014? I could be very wrong on that one...

Yes, from 1st March 2014...and...yes, at the moment, it looks like the certifier will bear a lot more liability. That's why certifiers will probably not touch a self build/direct labour job with a barge pole (or without a very high fee).

In addition, the building owner will have to submit a document to the local authority, on commencement, stating that they have appointed a 'competent' contractor to undertake the works (and name the contractor).

DOCARCH

4Sticks wrote: »

....to see Mr Self Builders undertakings that he has made appointments of competent persons. Who gets sued then ?

...you just beat me to it! :P

I hear Mr PH TD, telling folks that these new regs are all about consumer protection, but at the end of the day, as 4Sticks points out, essentially the building owner is or may well be left high and dry.

If the builder f**ks up...turns out he was not really competent...well it was the building owners responsibility to appoint a competent contractor in the first place!!!

Without any definition of competency and/or registration of building contractors, this is what makes the new regs a bit of a farce.