As a professional, I am well-aware of the importance of addressing commonly-searched questions about taxation. One of the most frequently searched queries on VAT (Value Added Tax) is whether subcontractors are liable to pay VAT or not.

The answer to the question “Is there VAT on subcontractors?” is not a straightforward one. The reason is that it depends on several factors such as the nature of the work, the contractual agreement between the contractor and the subcontractor, and the VAT registration status of the subcontractor.

In general, subcontractors are not liable to pay VAT if they are below the turnover threshold for VAT registration. According to current UK legislation, any business with a turnover of £85,000 or more is required to register for VAT.

If a subcontractor’s turnover is below this threshold, they do not need to charge VAT to their customers. However, if they are VAT registered, they must include VAT on the invoice they issue to the contractor, who can then reclaim the VAT as input tax.

On the other hand, if the subcontractor’s turnover exceeds the VAT registration threshold, they must register for VAT and charge VAT on their supplies to the contractor. In this case, it is the contractor`s responsibility to account for VAT on the supply when submitting their VAT return.

It is also worth noting that certain types of work are exempt from VAT, such as construction work on new buildings and certain types of repair and maintenance work.

In summary, the answer to whether there is VAT on subcontractors depends on the individual circumstances, and it is recommended to seek professional advice to ensure compliant tax procedures. Additionally, contractors should ensure that the VAT status of their subcontractors is verified before entering into any contractual agreement to avoid any unforeseen VAT liabilities.