11 Sep 2018

Claiming back VAT on a self-build property

VAT can be claimed back on a variety of features of a self-build or conversion project. Here Lisa Smith, Tax Manager at Whiting & Partners, explains more.

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Buying a house on the open market means you don’t have to pay VAT, whether it has been previously occupied or if it is new. When you’re building your own home, the same principle applies – whether you start from scratch or if you are converting your property into a residential dwelling, the labour costs are essentially zero-rated, and you will be able to claim back some or all of the VAT on the materials element of your project.

There are a few exceptions to this rule, however, so it is important to be clear on what you can and can’t claim for. It is easy to find yourself disappointed with some of the common misconceptions which lead to expected savings not materialising. It is also difficult to rectify errors down the line.

VAT reclaim rules

The scheme that covers VAT reclaim on new-build properties in the UK is VAT Notice 431 (NB) and 431(C) for a conversion scheme. This allows you to reclaim VAT from HMRC that you have paid on your project if you are:

    • Building a new house
    • Converting a non-residential building into a new dwelling
    • Bringing an existing dwelling that has not been lived in for 10 years back in to use.

    The home must:

    • Be separate and self-contained
    • Be for you or your family to live or holiday in
    • Not be for business purposes.

    This means extensions, refurbishments and annexes, for example, are not included as they do not create a new dwelling in their own right.

    What is covered?

    Examples of the materials you can claim VAT back on include:

    • Electrical and plumbing materials
    • Fittings i.e. floor tiles, fireplaces, light fittings etc.
    • Construction materials i.e. bricks, insulation, concrete etc.
    • Extractor fans
    • Fitted furniture
    • Delivery charge included on an invoice for materials.

    Materials you cannot claim VAT back on include:

    • Carpets
    • Kitchen appliances
    • Consumables
    • Bedroom furniture
    • Equipment hire
    • Professional fees i.e. architects or surveyors
    • Delivery costs invoiced separately.

    Listed buildings

    As of October 2012, all repairs and extensions on listed buildings are subject to VAT at 20%. You can, however, find some exceptions here with obtaining permission to demolish all but the facade or shell of a listed building and then the work may be classified as a new build and the VAT element could be eligible for reclaim. This area has some strict definitions of what is allowed and, therefore, checking with HMRC before you start work is a must.

    Renovations and extensions

    Work to renovate or extend an existing residential building will be subject to VAT at 20%. Again, there are some exceptions, for example, the Government introduced a reduced rate of 5% for properties in run-down areas that have been unoccupied for two or more years. This can often be checked through utility bills and council tax payments and evidence will need to be provided.

    Special circumstances

    Other special circumstances include adaptations for someone who is disabled, which is zero-rated and works involving a change in the number of dwelling units – a reduced rate of 5% is payable for these types of projects.

    How to claim

    To claim, your project must be eligible and lawful, for personal occupation by you or a family member, together with evidence of completion as well as detailed plans of the project. Some planning permissions can include conditions or restrictions on use or occupancy, which may mean that the project is not eligible.

    It is important to consider the VAT implications before starting your project to include this in your financial calculations.

    All original VAT invoices must be submitted to HMRC with your claim, therefore, it is important to ensure they include the following information:

    • Supplier name
    • VAT number
    • Invoice date
    • Description of goods and services
    • Invoice value.

    This is particularly important when buying online, so ensure that you obtain a valid VAT invoice when buying, as this may be difficult to obtain at a later date. Before you start, it is advisable to download the relevant pack from HMRC’s website and collate all receipts and invoices as you go along.

    Following the completion of your project, you will have three months to submit your claim. HMRC will often acknowledge within 10 days and settle within 30 working days.

    Getting advice on reclaiming VAT

    Many tradespeople and contractors are not experienced in dealing with the VAT rules on new-build and eligible projects. If you are unsure of any aspect of VAT on your project, engage the services of a professional to help you get it right – don’t leave it to the contractor to advise you.

Further information....

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