According to HM Revenue & Customs (HMRC) some £3.4bn is uncollected every year from VAT fraud and homeowners may be unwitting accomplices in this, as new research has found that four out of five of them fail to check VAT credentials when having work done.
While it is legal for a tradesperson to not be VAT-registered if they earn less than £83,000 per annum, there are some that claim to be registered so that they can charge customers higher prices.
Although the VAT charge can appear on the bill, if the trade professional is not upfront with their credentials, they can keep the 20 per cent fee. Consequently, the homeowner is overcharged while participating in VAT fraud.
Interestingly, checking credentials seems to be age and region-based, as the survey found that homeowners aged 18 to 34 are twice as likely to ask to see a trade professional’s VAT credentials than other age groups.
Meanwhile, 37 per cent of Londoners check, possibly because higher prices in the capital makes them more cautious, while people in Nottingham appear to care the least, with only 12 per cent saying they would ask to see proof of VAT registration.
However, despite the varied results across the UK, the majority of homeowners do not ask to see evidence of a trade professional’s VAT credentials, even though research suggests that they are more likely to get a better deal if the person they hire is registered and plays by the rules with the taxman.