"Disaggregation"Originally Posted by noTAGlove
"Disaggregation"
Not a VAT expert but think that only applies where a single entity is artificially separating income streams, rather than independent tradesmen contracting directly to the customer.
Think that’s correct but a big if. There may be no documentary evidence one way or the other. Might save some tax but then if the project has issues, you’re rather stuffed as everyone will say it’s not their responsibility.
All comes down to who your contract is with. If the contractor is arranging and managing subcontractors, that doesn’t help an analysis that the customer is separately engaging individual trades. There’s CIS tax to consider too, of course.
I'd agreed that the customer needs to recognise the potential downside of not having one main contractor and who they'd hold responsible for what in the event of any issues, especially when the attraction of an immediate saving is so appealing.
If HMRC were to check then they would want to ensure there's sufficient evidence to support the existence of separate contracts with multiple tradesmen and IME separate invoices from each would usually be sufficient. Any commission they pay to the main contractor would also need to be correctly accounted for but none of that is of concern for the end customer.
Without getting to into the rights wrongs and morals of it, there’s a deep lack of understanding in this thread about how a lot of the construction trade works in the real world, other sectors too for that matter
A friend of mine in hospitality wouldn’t be able to retain staff if there wasn’t a cash element to their pay, just the reality like it or not — paying suppliers is the same, a certain amount of cash is expected.
VATDSAG05150 - Disaggregation: the law
VAT Act 1994 Schedule 1, paragraph 1A (2) requires that, in determining whether any separation is artificial, due regard is had to the extent to which the different persons concerned are closely bound to one another by
financial
economic, and
organisational
links.
Schedule 1, 2(2) lays down three conditions which must be met before we can issue a Notice of Direction to any person:
he is making or has made taxable supplies
those taxable supplies form part of wider activities carried on concurrently or previously (or both) with one or more other persons
the totality of the disaggregated activities gives rise to a liability to be VAT registered.
We are not required to prove that there was an intention to avoid VAT. We are required to prove that the artificial separation resulted in an avoidance of VAT.
Before you can ask the VAT Registration Service (VRS) to issue a Notice of Direction, you will need to be satisfied that all the criteria in the VAT Act 1994, Schedule 1, 1A and 2 are met.
Hope the above quote from VAT manual helps.
I think the previous page at VATDSAG05100 is more helpful in that it clearly suggests that the above circumstances are not the typical arrangements for disaggregation. In the absence of clear evidence to suggest the contract was with the main contractor only or that all parties were really one trading entity then disaggregation wouldn't seem appropriate.
Interesting though this may be to tax nerds, it's not relevant to the OP's query so I'm out as they say.
I think if I can get paperwork, which I'm sure I will, then we're all good.
The company is registered and an approved dealer for a number of big door brands.
I'll have a think about the moral tax question, but the reality of saving £380 can't be sniffed at.
I would feel better about the work contributing to the national tax purse if I thought the present incumbents might use it to help improve the lives of the electorate, rather than line the pockets of their wealthy friends in return for sub-standard goods and services.
But this is the G&D so no more to be said on that.
Thanks for all the advice and opinions.
If it helps you decide, by the time this transaction finds its way into a tax return there will be a new government.
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