Being asked to pay for services of landscaper up front

[Cleisthenes]

I'm not a VAT expert, but it's based on a 12m rolling gross turnover figure. The point at which it is exceeded is when VAT registration needs to take place (and subsequently VAT charged on services). Taking payment from you a month earlier simply means they exceed the VAT threshold a month earlier. I dont see how it allows them to escape paying VAT on that amount.

Businesses have to review on a month by month basis whether they either expect or do actually go over tyhe threshold in the past 12m. At the end of the month, if they've gone over then they'll have to start accounting for VAT from the end of the next month.

Also, if they expect to go over the threshold in the next 30 days (which in this case they seem to think they will) then they have to start accounting for VAT immediately.

So basically this seems a bit odd as either they have to charge VAT or they don't. I'd be wary personally!

Unless they've specified that the quote will be subject to VAT I'd be arguing that you'll only pay the original price.

 

[gc123]

Are you sure this is a genuine email?! What on Earth does the company's finances/VAT thresholds etc have to do with its customers?

You have your quote for the works and so should stick with that. If they do send a revised bill for 'additional VAT', tell them to do one.

Of course this is caveated with tradesmen are difficult to get hold of (good ones) and us as customers are at their mercy

this you were given a price not your fault they cant keep to it .

 

[dlockers]

Did they assume they didn't have to collect/pay VAT because they were under 80k before?

Edit: Seems so!

 

[Flake87]

Lets for a moment assume this is genuine. The accountant phones up the landscaper who to be honest probably isn't too savy with VAT andand you accounting and tells him that from next month he will need to register for VAT, and he sends you what he thinks is a friendly Email advising you that he will need to charge an extra 20% if you pay him in the month he completes the work.
He says you can get around this if you pay him 75% of the money up front.

He's wrong though.
VAT is based on the date the account is invoiced, not the date on when it is paid so ask him to send you an invoice for the work dated this month, and you'll pay him when the work is done, that way it remains in the non vat accounting period. Also why does he think paying 75% would make this entire bill vat free? the remaining 25% would still attract VAT !

An invoice now costs you nothing and you will know there is something funny with this if he refuses to provide one.

 

[dlockers]

Lets for a moment assume this is genuine. The accountant phones up the landscaper who to be honest probably isn't too savy with VAT andand you accounting and tells him that from next month he will need to register for VAT, and he sends you what he thinks is a friendly Email advising you that he will need to charge an extra 20% if you pay him in the month he completes the work.
He says you can get around this if you pay him 75% of the money up front.

He's wrong though.
VAT is based on the date the account is invoiced, not the date on when it is paid so ask him to send you an invoice for the work dated this month, and you'll pay him when the work is done, that way it remains in the non vat accounting period. Also why does he think paying 75% would make this entire bill vat free? the remaining 25% would still attract VAT !

An invoice now costs you nothing and you will know there is something funny with this if he refuses to provide one.

Makes a lot of sense tbf.

 

[j.col]

Never pay anything upfront, it can lead to all sorts of problems.
On larger jobs we will ask for staged payments, eg. 25% to be paid when job is dug out, 50% to be paid when materials arrive and final balance when job is completed.
This is always stated upfront before we do any work.

Also if original quote was without Vat, then its down to the contractor to swallow the difference imo

 

[cheesyboy]

Businesses have to review on a month by month basis whether they either expect or do actually go over tyhe threshold in the past 12m. At the end of the month, if they've gone over then they'll have to start accounting for VAT from the end of the next month.

Also, if they expect to go over the threshold in the next 30 days (which in this case they seem to think they will) then they have to start accounting for VAT immediately.

So basically this seems a bit odd as either they have to charge VAT or they don't. I'd be wary personally!

Unless they've specified that the quote will be subject to VAT I'd be arguing that you'll only pay the original price.

No.

This is the relevant bit:

If you exceeded the VAT threshold in the past 12 months
You must register if, by the end of any month, your total VAT taxable turnover for the last 12 months was over £85,000.

You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the second month after you go over the threshold.

Example
Between 10 July 2017 and 9 July 2018 your VAT taxable turnover was £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2018. Your effective date of registration is 1 September 2018.

So anything you invoice before the registration date won't be subject to VAT.

The 'next 30 days' bit of the legislation is referring to £85k+ of sales within the next 30 days.

 

[gailjon]

Very interesting and informed replies - thank you very much. I think a phone call to them and discussion of the reasons are needed. I am worried that, as mentioned, this could be a worrying cashflow issue.

 

[ODuffer]

Credit card, at least you have section 75?

 

[The_Arbiter]

If a company was talking to me about their finances and how a job would cost more because of their finances i'd plainly cancel the job there and then. If the materials have been paid for by you, no biggy, keep them. If the contractor has paid for them, tell them to take them away unless there is a contract signed.

When you ask for a quote, you expect that figure. There are reasonable exceptions, like job takes longer to your house being an unseen issue somewhere, like a pipe in the way or whatever. A material is no suitable etc. Financial issues on their side, nah.

Just my inexperienced 2c.

 

[fezster]

VAT is based on the date the account is invoiced, not the date on when it is paid so ask him to send you an invoice for the work dated this month, and you'll pay him when the work is done, that way it remains in the non vat accounting period. Also why does he think paying 75% would make this entire bill vat free? the remaining 25% would still attract VAT !

An invoice now costs you nothing and you will know there is something funny with this if he refuses to provide one.

But if he invoices this month or next month, the invoice itself will take him over the VAT threshold and therefore VAT will apply regardless (it will have to be backdated by his accountant).

 

[Rroff]

Also why does he think paying 75% would make this entire bill vat free? the remaining 25% would still attract VAT !

I'm guessing that is how much the company is willing to swallow knowing they messed up and hoping to pass the rest on - but at the end of the day it is their screw up and they shouldn't be passing it on to the customer.

 

[K.C. Leblanc]

I'm guessing that is how much the company is willing to swallow knowing they messed up and hoping to pass the rest on - but at the end of the day it is their screw up and they shouldn't be passing it on to the customer.

Also the company will be able to claim back VAT on materials it buys so will make a saving there.

 

[Rotty]

Never paid anything upfront for work on house, soffits and fascias next week, they haven't asked for anything, neither did door company that did replacement last month

 

[Mr.Stu]

Never paid anything upfront for work on house, soffits and fascias next week, they haven't asked for anything, neither did door company that did replacement last month

Agree with this. Had loads of stuff done, and only ever staged payments for big extension work, and even then the first payment was 2 weeks in.

 

[cheesyboy]

But if he invoices this month or next month, the invoice itself will take him over the VAT threshold and therefore VAT will apply regardless (it will have to be backdated by his accountant).

No. You only start charging vat from date of registration.

 

[Psycho Sonny]

Hi all, funny email received today and I was wondering if it had happened to anyone else.

We had arranged quotes for a patio to be fitted to our house after having various quotes. We chose a builder who seemed to have a good reputation and had the materials delivered to the house for fitting sometime April/May.

Just today I got an email form the landscapers that included this:



Is this something that we should consider (paying the 75%?) I am worried that this seems a little bit of a 'we'll take your money and then buggar off' move from them. I don't think they are that sort of company but it does seem to be saying pay us the 75% now or pay an extra 20%.

Any thoughts?

Sounds like BS

When your turnover reaches the VAT threshold in a rolling 12 month period, you must start charging VAT from the first day of the second month after you exceed the threshold.

 

[Unisol Magic]

He's wrong though.
VAT is based on the date the account is invoiced, not the date on when it is paid so ask him to send you an invoice for the work dated this month, and you'll pay him when the work is done, that way it remains in the non vat accounting period. Also why does he think paying 75% would make this entire bill vat free? the remaining 25% would still attract VAT !.

Not necessarily. If he chooses to be on the ‘cash accounting’ VAT option, the VAT is becomes payable to HMRC (and reclaimed on purchases) on the date the payments are made or received. I use this option which is much better for cash flow for me.

Also, not sure I’d mentioned above, but I was the OP I’d be questioning why 20% would be added to the entire amount when (if he wasn’t to meet the VAT threshold) he would already be paying the 20% on the materials (as the builder wouldn’t have been able to reclaim this). So basically I’d be reminding the builder that the extra 20% should only be applied to the labour element.

If the OP was to agree to the extra 20% on the total cost, I’d imagine he’d be paying 44% on the materials.

Hope that makes sense

 

[~Divine~Wind~]

Aye unisols post makes sense, vat would've been paid on the materials already so to whack an additional 20% on the total means you'd be paying vat on vat.

I've always made sure the tradeaman/company accepted payment via cc and the upfront costs were materials only.

The one time I didn't follow this as was a recommendation I couldn't have been less happy with the work haha! Was meant ot take 5 days and be done by Xmas. End of Jan they finished ans then instead of finishing the work and bricking up and old window the bunged 100quid thur the letter box with a letter saying sorry can't find a brick.

I'd certainly not be paying a daft % up front and similarly I'd be paying the price agreed on the basis they got the job due to quote. What materials have already been supplied/delivered and have you paid for them.

As other have said maybe come to an agreement with a payment up front via cc but I'm betting they say they don't accept card.

I recently had work done by gunpoint who are a larger repointing company and i believe they even franchise out too, they came as a reccomendation from the missus dad as he worked with them for years. Asked to pay by cc oh sorry we only use bank xfer haha. Always like adding s75 as an additional layer of protection and of yours the points on my cc come in usefull haha

 

[fezster]

Not necessarily. If he chooses to be on the ‘cash accounting’ VAT option, the VAT is becomes payable to HMRC (and reclaimed on purchases) on the date the payments are made or received. I use this option which is much better for cash flow for me.

Also, not sure I’d mentioned above, but I was the OP I’d be questioning why 20% would be added to the entire amount when (if he wasn’t to meet the VAT threshold) he would already be paying the 20% on the materials (as the builder wouldn’t have been able to reclaim this). So basically I’d be reminding the builder that the extra 20% should only be applied to the labour element.

If the OP was to agree to the extra 20% on the total cost, I’d imagine he’d be paying 44% on the materials.

Hope that makes sense

Very good point.

Shouldn't it also be the case that the builder wasn't able to reclaim the VAT on materials previously, but now can, so that should offset some of the additional VAT he's having to charge.

Eg.

Pre-VAT:
Materials - 5k
Labour - 5k

OP pays 10k.
Builder makes 5k.

Post-VAT:
Materials - 4.2k + 0.8k VAT (rounded)
Labour - 5k + 1k VAT.

OP pays 11k.
Builder makes 5.8k by claiming VAT back on materials.