But I don’t want to pay VAT…

Well nobody likes having to pay tax, but tax is a fact of life. Any building business with an annual turnover of £79,000 or more is legally obligated to be VAT registered. A businesses’ turnover is not the same as profit. A businesses’ turnover is the total amount of money received by a business in a specified timescale. So, a business that invoices £100,000 in a year would be obligated to be VAT registered, even though, out of that £100,000 turnover, they may have only made £10,000 profit.

When you think of the cost involved in building an extension, or having a brand new roof put on your home, you can see that, unless you are sole trader, it is pretty much inevitable that you are going to quickly surpass the threshold where VAT registration becomes obligatory. Unfortunately, there are plenty of people out there who work strictly for cash in hand, and these people have an advantage over us by being able to charge 20% less to carry out the work. Many people are attracted by this saving without thinking the situation through properly. These traders are working outside the law and are therefore:

1. Unlikely to be members of the FMB. If they are, they are breaking the FMB’s code of practise and are therefore likely to have their membership revoked.
2. If they are not members of the FMB, they will not be able to offer an insurance backed guarantee via a scheme like Build Assure.
3. Talking of guarantees, a cash-in-hand builder will not be supplying you with any paperwork which could incriminate him with the Inland Revenue, so you have very little recourse should things go wrong.
4. More likely to be a rogue trader, operating from an unmarked van and with only a mobile telephone number, making them difficult to trace if things go wrong.

Waite Bros. Ltd. supports the FMB campaign to reduce VAT on all home repair, maintenance and improvement work from 20% to 5%. This targeted VAT cut would bring with it a huge number of economic, social and environmental benefits.

The Cut the VAT Coalition started with 21 varied organisations. Since work began, the EU has changed the law to allow member states to permanently reduce VAT to 5% in this area in order to support economic growth. Support for the campaign now extends to over 50 organisations and countless individuals, including some very senior politicians and well-known celebrities.

We call on the UK Government to cut VAT on home improvements to 5% in order to:
• Boost the UK economy
• Create thousands of jobs
• Bring thousands of empty properties back into use
• Improve the energy efficiency of our housing stock and reduce the incidence of fuel poverty
• Help those who cannot afford vital repairs to their homes
• Protect consumers and legitimate businesses by significantly reducing the competitive advantage of rogue traders.
If you would like to add your support to the campaign, please visit the official website here http://www.fmb.org.uk/news/campaigns/cut-the-vat/

Finally, it is important to know that there are a few areas of work where a VAT registered builder does not have to charge VAT at 20%. These include:
• The renovation of a house or flat which has been empty for at least 2 years - 5% VAT may apply
• The conversion of any commercial building like an office or a barn into a house or flats - 5% VAT may apply
• Conversion of a house into more or less homes than it was at the start of the project e.g. a house into flats, or flats back into a house - 5% VAT may apply
• Alterations to a house occupied by a disabled person to provide improved access or bathroom facilities - 0% VAT may apply
• The installation of certain energy saving materials into a house - 5% VAT may apply.
Since there are very criteria that need to be met for projects that qualify for reduced VAT, each project must be assessed on its own merits.

You can find out more information on HMRC’s website here http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm