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I have received a quote for a bathroom installation from a company that is VAT registered, after agreeing to the work, it has come to light that the installation is being completed by a third party that are NOT vat registered. As the quote doesn't state if the price includes or excludes vat and actually doesn't advise that a third party will be involved can I deduct a "VAT" proportion from the Installation work, inline with the VAT included on the products? Most of the work has been completed, the original company have sent quick book vat invoices, and they are forwarding the installation MSWord invoices, I wonder if this a Tax fiddle?

Where do I stand? Uk based

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    Is this for your home (rather than for a business)? If so why do you think you could deduct VAT? Their accounting arrangements aren't really your concern but you would certainly owe VAT if charged. Jun 9, 2021 at 12:43
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    So Company A told you it costs £X and didn't specify if that was inc or exc VAT. You later discovered that £X is made up of £Y + £Z. You have paid £Y to Company A which includes VAT. You are now being asked to pay £Z to Company B which does not include VAT. I'm not seeing the issue here...?
    – Vicky
    Jun 9, 2021 at 13:17
  • Perhaps there isn't an issues. My contract is with a company that is VAT registered, once they got the contract and only then when I received the order confirmation and booked in did I get informed the installation part was being sub contracted out. I have paid the VAT invoices to the company I employed, but the sub contractor appears to not be VAT registered. The quote and order doesn't specify if they are charging VAT or not. I thought on a quote it should specify if the work includes or excludes VAT. It is a private house.
    – Caroline
    Jun 9, 2021 at 16:59

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I wonder if this a Tax fiddle?

Doubtful.

I used to employ 3rd parties who were not VAT registered in the UK to undertake work for my company (which was VAT registered).

The invoice from my company to the customer always specified the amount of VAT payable as required by law and that was irrespective of whether any sub-contractor was involved or their VAT status.

The relationship between the principal invoicing company to the customer and the sub-contractor to the principal invoicing company is irrelevant to the customer and is no concern to them.

Clearly, if the sub-contractor is non VAT registered, the principal invoicing company to the customer will in no way be able in law to claim any input VAT from that transaction but because the principal invoicing company is then they are duty bound to charge VAT on the whole invoice which they must account in full to HMRC.

So, the simple answer to your question is a definite no. You are not entitled in any way shape or form to make any deductions from the principal invoicing company's invoice on account simply of the sub-contractors VAT status.

In the same way, the sub-contractor cannot invoice the principal invoicing company for other than his net cost. If he has himself paid VAT on goods he has supplied to meet his obligations under the contract with the principal invoicing company, the principal invoicing company cannot themselves account for the VAT paid by someone else.

It would perhaps be usual practice in such circumstances for the non-VAT registered sub-contractor to identify what supplies he needs and request the invoicing company to acquire them on his behalf in which event, the sub-contractor will only invoice his labour, not parts.

Conversely, if the sub-contractor is himself VAT registered, he will only invoice parts (including any profit element if applicable) at the cost net of VAT and claim the VAT back himself as input tax on his return at the relevant moment (and of course for his labour element). The principal invoicing company will claim such VAT back from HMRC through their VAT return at the relevant tax point.

Seemingly complex, but quite straightforward if you think about it.

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