The four gaps
| Gap | Nature | Order of magnitude |
|---|---|---|
| VAT | rate varies by operation | 6 or 21 % depending on the case |
| Fees and ancillary costs | mandatory items outside the contractor | substantial |
| Items outside the benchmark | land, connections, external works | highly variable |
| Price revision | gap between offer and execution | by duration and indices |
These four gaps compound. A construction benchmark excluding tax may represent markedly less than three quarters of the sum actually committed once land is set aside.
Address VAT first
It is the largest gap in value and the simplest to quantify, provided the applicable regime is known. The regime is determined before the quote is drawn up.
New build falls under the standard rate. Refurbishment of a dwelling of a certain age may qualify for a reduced rate under cumulative conditions. Demolition and rebuild falls under a separate regime with its own conditions.
An error of regime cannot be corrected afterwards without cost. On inspection it is the client who bears the difference and interest.
The detail sits in the article on VAT on construction. The conditions for the reduced rate are listed there one by one.
Fees do not follow the rate on the works
A point many funding plans handle badly.
Intellectual services fall in principle under the standard rate, even where they prepare works qualifying for the reduced rate. Architect, engineer and surveyor therefore invoice at a different rate from the contractor on the same project.
That divergence must appear explicitly in the funding plan, or the budget is understated from the outset. Fees are in fact paid before the first spade goes in.
A structuring Belgian feature is added: the architect is mandatory for works requiring consent, including under turnkey arrangements. It is not an optional item.
The detail sits in the article on fees and ancillary costs. The mandatory parties are listed there with their regime.
Reinstate the excluded items
The construction benchmark ignores, by construction, land, connections, taxes, mandatory studies and external works. Those items are costed separately and added to the benchmark.
Those items are covered in the article on what the price does not include. Their common trait is invisibility at the stage of a contractor's offer.
Connections surprise most, because they depend on third parties whose tariffs and lead times the project does not control.
Anticipate revision
More than twelve months often elapse between estimate and execution, particularly where consent takes time. Indexation is therefore provided for from the initial estimate.
Over that period material and labour prices move, and a contractual revision mechanism generally applies. It is covered in the article on price revision.
A budget without a revision provision is a dated budget, and its date is that of the estimate, not of the works.
The order of treatment
Four steps, in this order, because each conditions the next. The order is not indifferent and is kept without exception.
1. Determine the applicable VAT regime, with its conditions, before any pricing.
2. Establish the construction cost excluding tax, at the stage and on the area adopted.
3. Add excluded items and fees, applying to each its own rate.
4. Provide for revision and contingency, in proportion to duration and the share of existing fabric.
Reversing that order leads to forced decisions, because the room for manoeuvre has already been consumed by the time mandatory items appear. Mandatory items are therefore costed before discretionary ones.
The articles in this branch
The article on VAT on construction details conditions, exclusions and pitfalls. The five costliest pitfalls are set out there.
The article on fees and ancillary costs lists the mandatory parties and their treatment. Their payment timetable is also specified there.
The article on price revision explains the indices and their application. The trade-off between fixed and revisable price is set out there.
This article reflects tax rules and professional practice at the date of checking and serves as orientation. It does not constitute tax advice and does not replace assessment of the individual case.