How does VAT works for builders?

Hi All,

I am trying to understand builder’s prospective relating to their VAT issues and any suggestion will be very helpful.

  1. Sometimes builder says no VAT and offer no invoice just receipt. What does it mean?

  2. Also, is it true that they can avoid paying sales VAT as traders when they buy things for their business e.g. buying and install hob for me? e.g. if they install a hob for you that shows 100 pounds on the website from Currys, it cost them 80 to buy?

  3. Lastly, there was some confusing business with those insurance claims, e.g. you had a leak and builder fixed for you, now you can claim but the claim officer says they authorised the invoice but without VAT because builder’s VAT is not registered. My builder was extremely unhappy. But if insurance do not cover VAT and builder do not pay VAT because that is not his money which paid to the government, what is the issue and why they are not happy?

I am hoping either someone who is a builder or know how builder’s VAT works to understand a little.


a small builder under about 85k a year does not need to register for VAT… But cannot claim the VAT element on his purchases. So must not charge VAT. to his customers. >anyone with a turnover above about 85k should be registered and charge the VAT

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On the hob example, a VAT registered trader would still pay VAT when they buy something, but they can claim it back. But they then add it on again when they sell it to you.

Let’s say a hob costs £120 including VAT (£100+VAT) and the trader adds a 10% markup in selling it to the customer.

It would cost a non-VAT registered trader £120 and they would charge you £132 and make a £12 (10%) profit.

It would cost a VAT registered trader £100 (because they can claim the VAT back). They would then charge you £110+VAT = £132 but only make a £10 profit (because they lose the VAT on their markup - they pay VAT of £22 to HMRC and claim back £20 so HMRC make £2out of the deal).

Or, put it another way, the non VAT registered trader would only need to charge you £130 to make £10, whereas a VAT registered one would need to charge you £132.

And on the insurance, the insurance company should pay you what the trader charges, includng the VAT if they are VAT registered. If they aren’t VAT registered, they won’t pay any VAT because you aren’t paying any VAT.

You can check if someone is VAT registered here…

It is fraud to issue an invoice with VAT on if you are not VAT registered!

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