Tag Archives: VAT-property-construction

VAT: Buildings and construction update

By   1 February 2024
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HMRC has amended Notice 708 which covers:

  • when building work can be zero-rated or reduced-rated at 5%
  • when building materials can be zero-rated or reduced-rated at 5%
  • when the sale, or long lease in a building is zero-rated
  • where you can find out more about the VAT domestic reverse charge for building and construction services
  • when developers are blocked from deducting input tax on goods that are not building materials
  • when a builder or developer needs to have a certificate from their customer, confirming that the building concerned is intended to be used for a purpose that attracts the zero or reduced rate
  • when a customer can issue that certificate to a builder or developer
  • what happens when a certificated building is no longer used for the purpose that attracted the zero rate, the use for that purpose decreases or the building is disposed of
  • the special time of supply rules for builders
  • when a business, on using its own labour to carry out building work on a building or civil engineering structure that it occupies or uses, must account for a self-supply charge

Sections 18.1 and 18.2 of the Notice and the certificates in those sections have been updated to show they have force of law under The VAT Act 1994, Schedule 8, Group 5, Note 12.

VAT – Building your new home: How and what to claim

By   17 June 2020
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Building your own home is becoming increasingly popular.  There are many things to think about, and budgeting is one of the most important. 

The recovery of VAT on the project has a huge impact on the budget and care must be taken to ensure that a claim is made properly and within the time limits.  You don’t have to be VAT registered to make a claim, this is done via a mechanism known as The DIY Housebuilders’ Scheme.  It has specific rules which must be adhered to otherwise the claim will be rejected.

If you buy a new house from a property developer, you will not be charged VAT. This is because the sale of the house to you will be zero-rated. This allows the developer to reclaim the VAT paid on building materials from HMRC. However, if you build a house yourself, you will not be able to benefit from the zero-rating. The DIY Housebuilder’ Scheme puts you in a similar position to a person who buys a zero-rated house built by a property developer.

Who can make a claim?

You can apply for a VAT refund on building materials and services if you are:

  • building a new home in which you will live
  • converting a building into a home
  • building a non-profit communal residence, eg; a hospice
  • building a property for a charity

Eligibility

New homes

The house must:

  • be separate and self-contained eg; not an extension
  • be for you or your family to live or holiday in (not for sale when complete)
  • not be for business purposes (although you can use one room as a work from home office)
  • not be prevented from sale independently to another building by planning permission or similar eg; a granny annexe

A claim may also be made for garages built at the same time as the house and to be used with the house.

Contractors working on new residential buildings should zero rate their supplies to you, so you won’t pay any VAT on these.

Conversions

The building being converted must usually be a non-residential building eg; a barn conversion. Also, residential buildings qualify if they haven’t been lived in for at least 10 years.

You may claim a refund for builders’ work on a conversion of non-residential building into home. These supplies will be charged at the reduced rate of 5% for conversion works.  If the standard rate of 20% s charged incorrectly, you will not be able to claim the standard rated amount. Care should be taken that the contractor understands the VAT rules for conversions as these can be complex.

Communal and charity buildings

You may get a VAT refund if the building is for one of the following purposes:

  • non-business – you can’t charge a fee for the use of the building
  • charitable, eg; a hospice
  • residential, eg; a children’s home

What can you claim on?

Building materials – You may claim a VAT refund for building materials that are incorporated into the building and can’t be removed without tools or damaging the building.

What doesn’t qualify

You cannot claim for:

  • building projects outside the UK
  • materials or services that don’t have any VAT, eg;  were zero-rated or exempt
  • professional or supervisory fees, eg; architects and surveyors
  • the hire of plant, tools and equipment, eg; generators, scaffolding and skips
  • building materials that aren’t permanently attached to or part of the building itself
  • some fitted furniture, electrical and gas appliances, carpets or garden ornaments
  • supplies for which you do not have a VAT invoice

Examples of items you can, and cannot claim for are listed below.

How to claim

To claim a VAT refund, send form 431NB or 431C to HMRC

Local Compliance National DIY Team
SO987
Newcastle
NE98 1ZZ

What you need to know

You must claim within three months of the building work being completed.

You will usually get the refund in 30 working days of sending the claim.

You must include the following with your claim:

  • bank details
  • planning permission
  • proof the building work is finished eg; a letter from your local authority
  • a full set of building plans
  • invoices – including tenders or estimations if the invoice isn’t itemised
  • bills and any credit notes

VAT invoices must be valid and show the correct rate of VAT or they will not be accepted in the claim.

HMRC usually examine every claim closely and often query them, so it pays to ensure that the claim is as accurate as possible first time.  We find a review by us before submission ensures the maximum amount is claimed and delays are avoided.

Payments made after completion of the house cannot be claimed, and only one claim can be made for the whole project, so cashflow may be an issue.

Examples of items that you can claim for

The items listed below are accepted as being ‘ordinarily’ incorporated in a building (or its site). This is not a complete list.

  • air conditioning
  • building materials that make up the fabric of the property eg; bricks, cement, tiles, timber, etc
  • burglar and fire alarms
  • curtain poles and rails
  • fireplaces and surrounds
  • fitted kitchen furniture, sinks, and work surfaces
  • flooring materials (other than carpets and carpet tiles)
  • some gas and electrical appliances when wired-in or plumbed-in
  • heating and ventilation systems including solar panels
  • light fittings – including chandeliers and outside lights
  • plumbing materials, including electric showers, ‘in line’ water softeners and sanitary ware
  • saunas
  • turf, plants, trees (to the extent that they are detailed on scheme approved by a Planning Permission) and fencing permanently erected around the boundary of the dwelling
  • TV aerials and satellite dishes

Examples of items that you cannot claim for

This is not a complete list.

  • Aga/range cookers (unless they are solid fuel, oil-fired or designed to heat space or water)
  • free-standing and integrated appliances such as: cookers, fridges, freezers, dishwashers, microwaves, washing machines, dryers, coffee machines
  • audio equipment, built-in speakers, intelligent lighting systems, satellite boxes, Freeview boxes
  • consumables eg; sandpaper, white spirit
  • electrical components for garage doors and gates
  • bedroom furniture (unless they are basic wardrobes) bathroom furniture eg; vanity units and free-standing units
  • curtains and blinds
  • carpets and rugs
  • garden furniture and ornaments and sheds

Please contact us if you require assistance with a DIY Housebuild project.