Wednesday, 30 March 2016

How should you pay your builder?

You should always write a detailed spec of the works need to be done then ask for written quote before start of the job.

If works changed in the middle of the works, you should renegotiate and receive a new quote.

You must always ask for Invoice when the work is finished.

The Invoice may or may not include the VAT (20% or so...) depending on whether the builder is VAT registered (their annual turnover exceeds a certain amount e.g. £65k).

Some builders don't give invoice and insist on receiving cash so that you and them don't pay any tax. While, that's being financially attractive but that's illegal and has penalties of imprisonment and conviction if caught so not worth the risk. Also if you don't receive invoice, you won't be able to claim the costs back when selling the property or reducing it from the rental income.

It can be made via Cash or Bank Transfer. Preferably Bank Transfer since it's traceable in case HMRC investigates but Cash will also be fine as long as you have an Invoice and a Receipt from the builder.

Ask for a receipt for each payment for your own records.

You should keep all the invoices, payment histories and receipts for many years; 6 or 10? in case HMRC investigates.

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