Hi,
Just after some confirmation please. I once was told by an HMRC inspector that as a main contractor under CIS, you could claim the VAT back on materials recharged to you from a subcontractor who's not VAT registered as long as the original invoice is supplied to you.
Is this true?! And if so, presumably the same would apply for all sectors where first supplier is charging vat, middle person isn't but is passing the exact cost on to final customer who is registered? As long as the original invoice is supplied with details.
Hope I'm making sense!?
Thanks
No, as far as I know, if a subcontractor has invoices issued to it for materials that it has purchased, then a contractor can't reclaim the VAT on these invoices.
In that kind of situation, it can be beneficial for the VAT registered contractor to purchase the materials themselves (and so be able to reclaim the VAT, subject to the normal rules), leaving the non-VAT registered subcontractor to just invoice them for their labour. Could that be what the Inspector meant?
Another option would be for the subcontractor to act as an agent in the name of the principal (contractor) - see VAT Notice 700 Section 22.5 - but in that case, the invoicing for the materials would be between the supplier and the contractor.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
