Pricing a job 'plus VAT'???

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M&LMel

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Jul 19, 2013
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Hi everyone. Ok this may seem like a silly question to those of you in the know, but we are pricing our first job plus VAT and are having a disagreement!! ;)

So as an example our job goes (we are electrical contractors if that helps...)

Cost of materials to us from our wholesaler £10,000 + Vat = £12, 000
Cost of labour for the job £10, 000

Now what is confusing us is what we add VAT on, do we use the total of £22, 000 and then add VAT on to that??? Or do we not include the VAT our wholesaler is charging us so our total would be £20, 000 plus VAT???

I probably sound really silly asking this but when you don't know you don't know!

Thanks
 
Hi everyone. Ok this may seem like a silly question to those of you in the know, but we are pricing our first job plus VAT and are having a disagreement!! ;)

So as an example our job goes (we are electrical contractors if that helps...)

Cost of materials to us from our wholesaler £10,000 + Vat = £12, 000
Cost of labour for the job £10, 000

Now what is confusing us is what we add VAT on, do we use the total of £22, 000 and then add VAT on to that??? Or do we not include the VAT our wholesaler is charging us so our total would be £20, 000 plus VAT???

I probably sound really silly asking this but when you don't know you don't know!

Thanks

your quote would be what you agree with the client, if you quote for materials at cost, then stevens reply is spot on....

if not, you can quote for whatever cost you want, as andy says, you can add a mark up if you wanted to, depends on how much you value your customer....

so its either £20K + VAT

22K + VAT..... or more .....
 
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nelioneil

Free Member
Jan 22, 2013
709
105
Personally I would quote the cost of the service and leave it be. VAT is a government tax on taxible supplies and not of the business of the customer, it is irrelevant to the service performed.

Of course you can add at the end of the quote "vat is charged on taxable supplies" if you wish.
 
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nelioneil

Free Member
Jan 22, 2013
709
105
Not mentioning VAT on the quote could lead to confusion and the customer disputing the invoice total.

Sent from my GT-P1000 using UK Business Forums

I disagree. In many organisations when it comes to purchase orders, the order anount is always net, and that is common practice. The supplier accepts this and sends an invoice quoting the number, usually with Vat added. Presuming they are VAT registered and the supply/goods are taxable.

Same concept should apply to quotes, the VAT element is not part of the service. I do think they should quote their vat number on quotes though, that is a good giveaway.

It's like going on a website to purchase web hosting. The supplier might say £45 web hosting for the year, when you go to the checkout screen, VAT is added. Sometimes on the front page, the web hosted could say £45 ex VAT, but it's not needed.
 
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David Griffiths

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Jun 21, 2008
11,353
3,561
Cwmbran
www.4growth.biz
If you don't mention VAT on the quote, then the customer has every right to object if you try to add it later. There is plenty of legal precedent that if a contract is silent on the question of VAT then the prices, if relevant, are treated as including any VAT chargeable.

If your quotation includes VAT, that is not an issue and if your customer is a consumer I think that it's better to quote a VAT inclusive price and not refer to VAT at all.

If it's a business customer, then quoting ex VAT is probably the better option, but you must make it clear that VAT will be added at the going rate,

If you mention VAT in quotations to private individuals there is the risk that they will come back and ask if you'll knock off the VAT "for cash" and that's not a place that you should be going to.
 
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M&LMel

Free Member
Jul 19, 2013
8
0
The customer is a VAT regirstered business so will be claiming the VAT back.

We will be adding a mark up on material. So the material cost to us (in the example) will be £12000, which we will add our mark up on for example 20% which will make the total of materials £14400.

What was confusing me (not taking into account labour) was do we then add on 20% VAT onto the total amount of £14400??? If not do we add on VAT at our wholesale price, or our wholesale price plus mark up??

Thanks
 
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Anonymouse72

Free Member
Jun 16, 2012
764
158
i could be missing the point here so forgive me, but i think you need to forget about VAT in your workings out. just get your total price for materials & labour, including any profit margin/mark up, that will be the cost of the job. VAT just gets added on at the very end.

for commercial jobs we always quote a net price '+ vat @ 20%' (the actual amount of vat won't be detailed until invoice stage), this is usually the norm for business2business.
for domestic, we always quote a total price including vat & detail that fact, 'prices include vat @ 20%'.
 
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The customer is a VAT regirstered business so will be claiming the VAT back.

We will be adding a mark up on material. So the material cost to us (in the example) will be £12000, which we will add our mark up on for example 20% which will make the total of materials £14400.

What was confusing me (not taking into account labour) was do we then add on 20% VAT onto the total amount of £14400??? If not do we add on VAT at our wholesale price, or our wholesale price plus mark up??

Thanks

Materials £14400
Labour £10000

Total £24400

VAT £ 4880 20% of total

Total £29280
 
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Newchodge

Business Member
Nov 8, 2012
16,234
4,585
Newcastle
Possibly silly question, but are you VAT registered? If not you cannot charge VAT at all or claim it back. So cost to you is materials 12,000, labour 10,000, job total cost is 22,000 then add your mark up to get total price.

If you are VAT registered, then cost to you is materials 10,000, labour 10,000, job total cost is 20,000 then add your mark up, to get total price. Then add VAT to that.

If customer is VAT registered quote as total price plus VAT @ 20%.

If customer is not VAT registered quote total price including VAT.
 
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You can do it however you want unless you have told the customer the materials are at cost. However - you are in this to make profit so I would certainly mark up the materials before adding Vat.
All you need to think of is what do I want to be left with after ive done my vat return.
If you want £14, 000 for a job and (net materials where 5000 which you mark up by 20% taking it to £6, 000) your net invoice would be £20, 000 then add 20% VAT on top.
Remember whenyou buy materials you are probably paying less than they would if they went into a store. And you have to take time ordering and do admin for this so why not add something on to cover your efforts anyway.
Caspar
 
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I disagree. In many organisations when it comes to purchase orders, the order anount is always net, and that is common practice. The supplier accepts this and sends an invoice quoting the number, usually with Vat added. Presuming they are VAT registered and the supply/goods are taxable.

Same concept should apply to quotes, the VAT element is not part of the service. I do think they should quote their vat number on quotes though, that is a good giveaway.

It's like going on a website to purchase web hosting. The supplier might say £45 web hosting for the year, when you go to the checkout screen, VAT is added. Sometimes on the front page, the web hosted could say £45 ex VAT, but it's not needed.

Disagree even more.

1. Send quote to large corporate or Public sector ex VAT.
2. Get PO for ex VAT amount.
3. Send invoice + VAT
4. Get invoice placed on hold as it is more than PO amount
5. Spend 8 weeks trying to get invoice released for payment
6. Go back to 1 but send new quote with VAT
 
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nelioneil

Free Member
Jan 22, 2013
709
105
Disagree even more.

1. Send quote to large corporate or Public sector ex VAT.
2. Get PO for ex VAT amount.
3. Send invoice + VAT
4. Get invoice placed on hold as it is more than PO amount
5. Spend 8 weeks trying to get invoice released for payment
6. Go back to 1 but send new quote with VAT

:D

That seems very familiar!

I'm trying to think from a legal point of view, I don't think a quote constitutes a valid contract. Probably a invitation to treat. Whereas I think a PO would form a valid contract.

Need some clarification :|
 
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greengecko

Free Member
Feb 3, 2010
254
38
Disagree even more.

1. Send quote to large corporate or Public sector ex VAT.
2. Get PO for ex VAT amount.
3. Send invoice + VAT
4. Get invoice placed on hold as it is more than PO amount
5. Spend 8 weeks trying to get invoice released for payment
6. Go back to 1 but send new quote with VAT

Agreed, had the same situation today but only for the shipping costs (multiple pallets to Europe) - If I hadn't spotted it our invoice and their PO would've been different, meaning hours on the phone to their accounts to try and get it resolved.
 
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Alan

Free Member
Aug 16, 2011
6,959
1,922
£10,000 - cost of materials ex VAT
£2,000 - 20% markup on material
£10,000 - cost of service
------------
£22,000 ex VAT

Quote inc VAT at 20%
£26,400
 
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£10,000 - cost of materials ex VAT
£2,000 - 20% markup on material
£10,000 - cost of service
------------
£22,000 ex VAT

Quote inc VAT at 20%
£26,400


The £22,000 is your quote - the extra £4,600 is a cost from government for which you are acting as Tax collector - it is not "your" money and never will be but it does need to be detailed as a separate item on a b2b quotation so that a smart a***e can't use it as a reason to delay payment.
 
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