Buy kitchen from fitter so he can claim the VAT

PaDE

PaDE

PaDE

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Any catch here?

Our Kitchen fitter has suggested he buys the kitchen and I buy it from him for the exact same price.

He says it will help him as he can claim the VAT back and he’ll return the favour and knock the VAT off several other jobs he will do for me (tiling, plastering and fitting the kitchen)

Is there a catch? The kitchen price is going to be “X” whatever I decide to do. Just one way I’ll have cheaper jobs as opposed to paying extra with VAT the other way.

Cheers
 
Well he cant claim the vat back unless hes vat registered... in which case he should be charging you vat.

Sounds dodgy tbh.
 
The risk is with him, but you’ll essentially be assisting in tax evasion.

It’s your choice, depends what your view is
 
kindai said:
Well he cant claim the vat back unless hes vat registered... in which case he should be charging you vat.

Sounds dodgy tbh.
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Yeah, trying to work this out in my head.

He buys a kitchen for £120 and sells it to PaDe for £120. He would claim back the £20 back on the purchase but it’s cancelled out by the £20 he gets from PaDe that he needs to pay the VAT man. If he’s legit it should cancel itself out.

If he’s flat rate VAT though it would be different and he does make money from the VAT transaction that he could then offset the cost with yourself.

Edit: worth mentioning though it wouldn’t be a massive amount, no where near 20%.
 
What if you have an issue with the kitchen? Damaged unit on delivery is he going to sort it out? A year down the line you have an issue will he be bothered to sort it? If you’re using a credit card and pay yourself you have protection there.
 
no money will be saved unless you pay the builder for the kitchen in cash and he doesn't give you any sort of receipt.

fitting a kitchen will cost padme £1000
buying the kitchen will cost £2000 inc vat.

if the builder buys the kitchen for you and he can claim the vat back, then it will cost approx £1666 for the kitchen with vat taken off, but then as he's vat registered he has to charge you vat and so he will put the vat back on, bringing the cost to £2000.
 
Thinking a bit more about this, there is a legitimate reason why the fitter might do this. The recent introduction of the Limited Cost Trader rules to the flat rate VAT scheme means that someone that only sells services (like a kitchen fitter) doesn’t benefit from VAT to any significant amount.

But if he can put enough goods through the books (and it’s not that much - 2% of his annual turnover if I remember correctly - 1 kitchen would likely be enough) he qualifies for a better flat rate %, which could then total £1000s over a year depending on how much he makes a year.

It could easily be worth taking a hit on one kitchen by giving you it VAT “free” to encourage you to introduce a middle man to the transaction rather than buy direct.

Or if you’re paying cash in hand, yes it’s dodgy!
 
Jokester said:
But if he can put enough goods through the books (and it’s not that much - 2% of his annual turnover if I remember correctly - 1 kitchen would likely be enough) he qualifies for a better flat rate %, which could then total £1000s over a year depending on how much he makes a year.
!
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unless it's different for each trade, we are flat rate and this is worked out each quarter and not yearly. we can't claim vat back unless it's over £2k, which i assume a kitchen would be any way?
 
Fairly sure the answer is no said:
unless it's different for each trade, we are flat rate and this is worked out each quarter and not yearly. we can't claim vat back unless it's over £2k, which i assume a kitchen would be any way?
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The rules for Low Cost Trader are based on annual turnover from what I can remember. That’s a good point about £2k though, if he claims back the VAT on that item does he still pass on all the VAT when he sells it on to the consumer or is still treated under flat rate rules?

Eg He buys it for £120, claims back £20, then sells it for £120, but only pays 12.5% (not sure what % he could claim here without looking st the lists) of £120 = £15, so he can pocket 25% of the VAT and now also qualifies to use the reduced flat rate % for the rest of the year on all his sales?
 
The Craig said:
Where's the kitchen from? He might also be able to get a discount.

Frankly id do it/pay him cash and let him sort his own tax affairs without overthinking it!
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I think it's DIY Kitchens sometimes they have discounts but it's offered to everyone. PADE I did manage to get soft closing doors on my cabinets chucked in for free. :)
 
He's allocating the cost of the kitchen to a zero rated VAT job (new build residential) therefore he can claim the VAT back without charging you, he's then probably asking you for cash for the kitchen and then further evading other company and personal taxes.
 
Fairly sure the answer is no said:
unless it's different for each trade, we are flat rate and this is worked out each quarter and not yearly. we can't claim vat back unless it's over £2k, which i assume a kitchen would be any way?
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Jokester said:
The rules for Low Cost Trader are based on annual turnover from what I can remember. That’s a good point about £2k though, if he claims back the VAT on that item does he still pass on all the VAT when he sells it on to the consumer or is still treated under flat rate rules?

Eg He buys it for £120, claims back £20, then sells it for £120, but only pays 12.5% (not sure what % he could claim here without looking st the lists) of £120 = £15, so he can pocket 25% of the VAT and now also qualifies to use the reduced flat rate % for the rest of the year on all his sales?
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£2k is for capital purchases.

My suspicion is that the fitter is getting a trade discount or kickback/incentive on the purchase of the kitchen, and pocketing that. Or he doesn't understand VAT properly but has been told by a mate down the pub that this is a good way to do things. Or it's a cash in hand job
 
Thanks for the replies, much appreciated.

The Kitchen is circa £14k and will be the first time the fitter has used them (if that makes a difference)

He’s obviously gaining or thinks he his so I’m not sure whether or not I should be bothered about how he conducts his taxes.

From my point of view I suppose I have to think of where I stand if something did go wrong. I wouldn’t pay for the kitchen until it was fitted. Plus the fitting would be cash (my only gain) it’s more the after care.
 
PaDE said:
Thanks for the replies, much appreciated.

The Kitchen is circa £14k and will be the first time the fitter has used them (if that makes a difference)

He’s obviously gaining or thinks he his so I’m not sure whether or not I should be bothered about how he conducts his taxes.

From my point of view I suppose I have to think of where I stand if something did go wrong. I wouldn’t pay for the kitchen until it was fitted. Plus the fitting would be cash (my only gain) it’s more the after care.
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This is my thinking. If your units develop a fault a year down the line it will be much easier to deal with them directly rather trying to get your builder/kitchen fitter to sort it.
 
Jokester said:
Thinking a bit more about this, there is a legitimate reason why the fitter might do this. The recent introduction of the Limited Cost Trader rules to the flat rate VAT scheme means that someone that only sells services (like a kitchen fitter) doesn’t benefit from VAT to any significant amount.

But if he can put enough goods through the books (and it’s not that much - 2% of his annual turnover if I remember correctly - 1 kitchen would likely be enough) he qualifies for a better flat rate %, which could then total £1000s over a year depending on how much he makes a year.

It could easily be worth taking a hit on one kitchen by giving you it VAT “free” to encourage you to introduce a middle man to the transaction rather than buy direct.
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Spot the contractor ;):p
 
I'd go with he's charging the cost they woudl charge you, but is actually getting a nice chunk of discount.

When I was having our hallway redone out Joiner was raging that the place he used for supplies had given me the trade costs xD
 
I'm in the process of buying a New Kitchen & Bathroom. I'm going down the route of buying these myself & getting a contractor to fit it. If he says I can get the same cheaper & pass the discount on to you, that makes me suspicious that there will be more of a benefit to him that it will be for me. If said contractor wants my business then he'll do what I'll ask. Sundries (Pipes/sockets/wiring) I'm prepared to pay for any sundries through him as I'm not certain what he'll want in the way of those to fit said rooms.
 
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