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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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We agreed to employ a builder and also agreed to paying a deposit

Resolved Question:

We agreed to employ a builder and also agreed to paying a deposit before he started work. He charged VAT on the deposit. The deposit excluding VAT is being repaid by instalments when he presents his fortnightly invoice.
We pay his invoices include VAT and we pay the invoice on time. However, is he within his rights to charge VAT on the deposit as we're paying VAT on each and every one of his invoices and no invoice was given showing purchase of good for the deposit.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

If you have paid your builder a deposit that equates to say an invoice value and you subsequently receive an invoice from him showing work done value plus VAT then you have effectively paid an amount inclusive of VAT. He should give you credit for the whole amount and not just ex VAT value. He is wrong if he does not give you allowance for full deposit paid. A deposit is not an invoice but he could ask for deposit that includes goods value plus VAT so he is covered and not out of pocket.

You should prepare a schedule of all payments to him and present it to him. It would show overpayments and you should ask him to consider the overpayments against future deposits and/or invoices.

Suggest a schedule like this
Example
Date Ex VAT VAT Total
01/05/2015 4,000 800 4,800
08/05/2015 3,000 600 3,600
15/05/2015 5,000 1,000 6,000
Total 12,000 2,400 14,400
Invoices received
03/05/2105 4,000 800 4,800
10/05/2015 3,000 600 3,600
17/05/2015 5,000 1,000 6,000
Total 12,000 2,400 14,400
Credit given 12,000
Overpayment 2,400
If he does not co-operate you should consider an action in small claims court.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

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