ABSTRACT
Value added tax (VAT) was introduced to the construction industry through the Finance Act 1972. It is now administered through HM Revenue & Customs. Two clauses have been included under this heading, dealing with matters relating to financial legislation: Valued added tax – supplemental provisions and Construction industry scheme. The contract sum, on most forms of contract, is exclusive of VAT. Adjustments to the contract sum will also be exclusive of VAT, since the conditions specifically state that VAT will not be dealt with under the terms of the contract. If, after the date of tender, the goods and services become exempt from VAT, then the employer must pay the principal contractor an equal amount to the loss of the principal contractor's input tax. Where an employer makes an error or omission in the calculation of the statutory deduction, the error is usually corrected by repayment or by further deduction from payments due to the principal contractor.
