I know there are people from various walks of life here, so hopefully someone has an answer and, even better, an official source that their answer is based on. We recently had some building work done at home. The builders, who are VAT registered, brought in a 3rd party electrician, and a 3rd party decorator, neither of whom are VAT registered. The builders then sent us an invoice, including the costs of the electrician and the decorator, and put a VAT charge on all of it - i.e. VAT on the electrician's work and the decorator's work. We weren't quite sure about this, if for nothing else than it meant we got a bill for more than were expecting (e.g. we agreed a price on the decorating, which we thought was total price, but then they added VAT to that price). So we found this gov.uk page on disbursements: https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers#what-isnt-a-disbursement ...which made us think the electrical and decorating costs were disbursements and VAT was not due on it. Anyone any wiser than me on this? I've not accounting/business experience. Thanks.
My completely unprofessional thought on this is that if you get an invoice which includes VAT from a company that is VAT registered and has there VAT registration detials on the invoice, you pay the VAT (what they then do with this money is down to them, not to you, and If there pocketing it and declaring it as VAT then I'd assume that's fraud but that's between them and the tax man nothing to do with you.) The fact that you'd agreed a price and the invoice you'd received is not that price is something I would suggest you could challenge them on, but unless you have it in writing I'd say its a case your your word against there's, they had assumed ex VAT and you'd assumed inc VAT so I don't think you've got much to complain about there either.
"Costs that your business incurs itself when supplying goods or services to customers are not disbursements for VAT. It’s you who buys the goods or services for use in your own business. It’s up to you whether or not you itemise costs like these on your invoices. If you do show them separately when you invoice your customers they’re known as ‘recharges’, and not disbursements. You’ll have to charge VAT on them whether you paid any VAT or not." Sent from my Nexus 6P using Tapatalk
I'd agree with aramil - if the original company was the one who paid the third party contractors then recharging to you, they'll have to charge VAT on it. However, it was wrong of them to give you a quote without including VAT (or at least adding "plus VAT" to the quote's final figure), and that's the only thing I'd query with them - I'm fairly sure that when a business deals with individuals (as opposed to companies), legislation says that they should quote VAT-inclusive prices. That said, I think it's common for the building trades to quote without VAT in case they get paid in cash (and then the payment doesn't get included on their books...or reported to HMRC). I'd definitely argue the toss with them on this, and see if you can't meet somewhere in the middle?
