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Trust & Compliance

UK VAT Compliance

How IBIOS supports UK VAT requirements for bathroom supply and installation businesses. VAT rates, supply-and-fit treatment, Making Tax Digital, and reverse charge for CIS sub-contractors.

This page provides general guidance only. VAT rules are complex and subject to change. Always confirm the correct VAT treatment for your specific circumstances with a qualified accountant or HMRC directly.

VAT rates relevant to bathroom and trade businesses

The correct VAT rate depends on the nature of the supply, the type of property, and in some cases whether the work is carried out by a contractor or directly. IBIOS supports all three rates on quote line items so you can apply the correct treatment per line.

20%

Standard rate

Supply-only of bathroom goods, tiles, fixtures, and fittings. Labour charges for fitting where supply-and-fit is treated as a single standard-rated supply.

5%

Reduced rate

Installation of energy-saving materials in certain circumstances. Some renovation and alteration work on residential properties not used as a main home for 2+ years. Confirm with your accountant.

0%

Zero rate

Construction of new dwellings by a VAT-registered builder, and certain buildings used for a relevant residential or charitable purpose. Approved alterations to listed buildings are now generally standard-rated. See HMRC VAT Notice 708 and check with your accountant.

Supply-and-fit: separate vs composite supply

When a bathroom business both supplies the goods and installs them, the VAT treatment depends on whether the contract is a “composite supply” or two separate supplies.

Composite supply (most common)

Where the main purpose of the contract is the installation (the goods are incidental to the fitting), HMRC may treat the whole supply as a single service. The VAT rate for construction services (which can be reduced or zero-rated in qualifying circumstances) applies to the whole contract. See HMRC VAT Notice 708 for the detailed test.

Separate supplies (supply only + separate fitting)

Where goods and labour are invoiced separately or the contract clearly separates them, the goods element is standard-rated (20%) and the labour element may attract a different rate depending on the property type.

IBIOS quote templates allow you to present supply and installation as separate line items with different VAT rates, or as a single combined line. Your accountant can advise on the appropriate presentation for your contract type.

Making Tax Digital (MTD)

MTD for VAT requires VAT-registered businesses to keep digital records and submit VAT returns digitally through software that works with MTD. IBIOS is not a VAT filing tool. It supports your MTD workflow by keeping payment records that your accountant can be given for your accounting software, such as Xero or QuickBooks, which handles the VAT return.

VAT registration threshold (April 2024)

The VAT registration threshold is £90,000 from 1 April 2024 (previously £85,000). If your taxable turnover exceeds this in any rolling 12-month period, you must register for VAT. MTD for VAT applies from the date of your first VAT period after registration.

The workflow for most IBIOS customers is: IBIOS records payments and purchase orders against each job → your accountant can be given the payment records (direct Xero sync is coming soon) → Xero computes VAT liability and files the return with HMRC via MTD. IBIOS’s role is accurate transaction capture; the VAT computation and filing is handled by your accounting software.

Reverse charge VAT & CIS

The domestic reverse charge for construction services applies when a VAT-registered contractor supplies construction services to another VAT-registered business in the construction industry (a CIS-registered sub-contractor relationship). Under reverse charge, the customer (not the supplier) accounts for the VAT.

For bathroom businesses that use CIS-registered sub-contractors for installation work, this means the sub-contractor invoices without VAT and notes “reverse charge applies.” You, as the main contractor, account for the output VAT on your VAT return and reclaim it as input tax simultaneously (net effect nil if you are fully taxable).

IBIOS supports reverse charge line items on purchase invoices from sub-contractors. The line item can be flagged as reverse charge so the correct accounting treatment is applied when exporting to your accounting software.

Reverse charge does not apply to end-customer (consumer) sales — only to B2B transactions within the construction supply chain. Your sales to homeowners are standard-rated (subject to the supply type rules above) regardless of CIS status.

Which IBIOS features help with UK VAT?

IBIOS (Integrated Business Intelligence & Operations System) is made by IBIOS Limited (NI743167), Northern Ireland. These pages cover how IBIOS treats VAT on quotes and orders, and what is still coming soon.

What do people ask about VAT in IBIOS?

Does IBIOS file VAT returns?

No. IBIOS is not an accounting package and does not file VAT returns directly with HMRC. VAT returns are filed through your accounting software (Xero, QuickBooks, or similar). Your accountant can be given the payment records from IBIOS for your accounting package.

Can IBIOS handle partial VAT exemption?

Partial exemption (where a business makes both taxable and exempt supplies) is a complex area that requires accounting-level support. IBIOS supports standard VAT rate assignment per line item on a quote, but the calculation of a partial exemption recovery percentage is handled in your accounting software rather than in IBIOS.

Is supply-and-fit always standard-rated?

Not necessarily. HMRC VAT Notice 708 covers VAT on construction services in detail. Certain types of work on qualifying buildings may attract the zero rate or reduced rate even for supply-and-fit contracts: new dwellings built by a VAT-registered builder are generally zero-rated, and the reduced rate applies to certain renovations and conversions. Approved alterations to listed buildings are now generally standard-rated. You should confirm the correct treatment with your accountant for each project type. IBIOS allows you to set the VAT rate per line item to apply the correct treatment.

What about VAT on finance charges?

Finance charges (such as late payment interest) are generally VAT-exempt under UK VAT law. IBIOS does not automatically add VAT to finance charges. If you apply a surcharge for late payment, you should confirm the VAT treatment with your accountant as it depends on the nature of the charge.

How does IBIOS handle VAT for EU imports post-Brexit?

Since Brexit, goods imported from EU suppliers are subject to UK import VAT at the point of entry, rather than being treated as intra-EU acquisitions. IBIOS records purchase orders from suppliers but does not calculate import VAT on those orders. Import VAT is handled at the border by HMRC and your freight forwarder. The cost you record in IBIOS for supplier purchases should reflect the landed cost inclusive of any import duties and taxes.

Questions about VAT compliance in IBIOS?

Contact us at privacy@allforone.ai. For specific VAT advice, we recommend consulting a qualified accountant or contacting HMRC directly — we can tell you how IBIOS handles data, but your accountant should confirm the correct VAT treatment for your business.

Relevant HMRC references: VAT Notice 708 (Buildings and construction), HMRC CIS reverse charge guidance (VAT1614A/B/C for zero-rating certificates).