Are Liquidated and Ascertained damages VAT-able on a construction project?
It is common practice for a building contract to include a clause regarding the rate of damages due to the client from the constructor in the event of non-completion of a contract. This has the effect of allowing both parties to know in advance the financial implications of a late project completion. These liquidated damages are outside the scope of VAT and therefore should not reduce the amount of VAT already paid on a project.
