Q: I am a plumber sub-contracting on new builds which are zero VAT rated. Are there any reasons not to register for VAT?
Oct 03 2006
Answered by: Clive Lewis Ask a question
Services supplied 'in the course of construction' of a building either designed as a dwelling or number of dwellings, or intended solely for a relevant residential or charitable purpose and services which relate to the construction, are zero rated for VAT. But the VAT rules can become complicated if you provide services away from new residential buildings.
I assume that your turnover is below the mandatory VAT registration threshold of £61,000. Voluntary registration will allow you to reclaim Input VAT on your expenses.
If turnover is above the registration threshold (currently £61,000) it is compulsory to notify liability to register. However, businesses which make zero-rated supplies can apply for exemption from registration. That is useful for those who do not want to bother with VAT returns where little or no input VAT is being incurred.
Applying for exemption from VAT registration is unlikely to be beneficial if the plumbing business incurs significant input VAT or supplies some goods with his services.
If turnover is below the VAT registration threshold it may still be beneficial to register in order to recover input VAT. Building materials supplied in relation to zero-rated supplies of construction services, which are incorporated in the new building are also zero rated.
If the plumber also supplies zero rated materials he will be able to recover the input tax on such purchases if he is registered for VAT. The conclusion is therefore that you should register for VAT if you incur significant input VAT, either on your own expenses and purchases or on materials incorporated in the building.
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