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.