Self-build.co.uk

Self-build.co.uk
Search
CLICK FOR MENU

Our Guide to Claiming Back VAT on a Self Build

Printer-friendly version
Self builds are zero rated for VAT. Mike Hardwick explains what you'll be able to claim, and how to claim it
house constructed with oak frame and SIPs

When you buy a house on the open market, you don’t have to pay VAT, whether it is new or has been previously occupied. So when you build your own home, the same principle applies: whether you’re starting from scratch with a new build or converting a property into a residential dwelling, labour is essentially zero rated, and you will be able to claim back some or all of the VAT on the materials element of the build.

However, there are exceptions to this rule, and you need to be clear about what can and cannot be claimed for. There are some common misconceptions about VAT reclaims, which can result in disappointment when expected savings don’t actually materialise.

I’m giving you the lowdown on how VAT applies to self build projects, and how to go about claiming back the cash that you are entitled to.

What’s covered?

VAT Notice 431 (NB) is the scheme that covers VAT reclaim on new build properties in the UK (this includes the Isle of Man, but not the Channel Islands). The premise of self build VAT reclaim is that you are building your principle private residence − you can’t claim the VAT back if you plan to use the property for a business purpose.

So if you are building to sell for a profit, let it out or run a bed and breakfast, then you won’t be allowed to reclaim. Don’t worry if you intend to work from home, though: using one room as an office is considered acceptable by the taxman.

Conversions of non-residential properties − structures that have never been lived in or uninhabited for 10+ years − are covered by another scheme, VAT Notice 431(C). It’s basically the same process, but there are differences in the way VAT can be reclaimed against labour for a conversion (and the amount). For example, builders will charge you at 5% on labour-only or supply-and-fit contracts - but you can reclaim this, along with the 20% on materials, at the end of the project.

Interestingly, you can also make a claim if you buy the shell of a new property from a developer and then complete the fitting out yourself or through another builder; I suspect that this option will become more popular as the concept of custom building takes hold. It’s worth having a look at the HMRC website, which has links to the forms you will need as well as helpful supporting notes.

Extensions & renovations

Any work you undertake on an already completed building (refurbishment, adding an extension, converting the loft or constructing a granny annex or new garage) will not be covered. So it will attract VAT at 20% on materials and labour − despite the fact that these are ‘new build’ additions to the property.

There are some exceptions, though. To make the refurbishment of properties in run-down areas more economically attractive, the government introduced a reduced rate of 5% VAT for houses that have been unoccupied for two or more years.

This rate applies to all labour and materials used on a renovation project, but it cannot be reclaimed – it is up to your builder to invoice you correctly. The best way of proving whether a house has been unoccupied is by checking council tax payments or utility bills.

Listed buildings

The rules have changed for listed buildings, too. VAT on approved alterations used to be reclaimable, but as from October 2012, all repairs, alterations and extensions on listed buildings are liable to VAT at the full 20% rate.

However, there are exceptions here, too, in that if you obtain permission to demolish all but the facade or shell of a listed building, then the construction work could be classified as a new build and the VAT element might be eligible for reclaim. It’s a tricky area with some fairly strict definitions of what is and isn’t allowed, so it’s best to check with HMRC before you start work.

What can you claim for?

Labour on a new-build property is always zero rated, so it should never be charged, regardless of whether the builders or tradesmen you use are VAT registered or not. When it comes to the materials incorporated into the build, you need to claim the VAT back afterwards.

Conversions are slightly different and in some cases, VAT is charged on labour but at the reduced rate of 5%. This is the main reason for having different claim forms for new build (431NB) and conversions (431C).

A common misconception is that all VAT on a self build project can be reclaimed. This is not so − the VAT due on professional or supervisory services (like surveys, design and planning, and tool and plant hire) is not exempted.

The HMRC website notes show what can and can’t be claimed for, but the list of exemptions is extensive and not entirely logical, so I’ve produced a list (found at the end of this article) showing what can and can’t be reclaimed.

This is not exhaustive, so if in doubt, either call HMRC’s VAT DIY helpline for advice, or just include it in your submission anyway. The worst that can happen is that someone puts a line through the item and it gets rejected.

How do I claim?

Before you start the build, download the relevant pack from HMRC’s website and then collate all of the receipts and invoices for the materials you will be claiming for as you go along.

It is important that these are all original documents, have the supplier’s VAT registration number, plus list the quantity and description of the goods and the price of each item. If the value of an invoice is more than £100, then it must show your name and address.

Anyone who buys eligible goods for your project can make the claim. Your builders can do some or all of the reclaim for you and simply not pass the VAT charge on to you at all, which can really help your cash flow.

However, it is frequently the case that you will have bought considerable quantities of materials yourself and will therefore want to make your own submission. Claims are always made at the end of the project – usually after your building control officer has issued the completion certificate.

There are other documents that can be used to prove completion, such as a certificate of habitation. Another option is to obtain a letter from your bank or building society confirming that the last element of any finance package has been released because they consider the house complete.

You then have three months to submit your claim, which HMRC will acknowledge within 10 days and will usually settle within 30 working days.

Buying from overseas

If you have bought items from within the EU, you can claim at the rate paid converted into sterling. If you have imported building materials into the country from outside the EU, then you will need to provide evidence of the VAT paid together with the original shipping or transit documents.

Correcting errors

If you find you have been charged VAT in error (by paying for VAT on labour on a new build project, for example) then you won’t be able to claim that erroneous payment back from HMRC, because the money will not have gone to them. As no VAT was due, it will have gone straight to your builder.

Your only recourse will be to go back to the builder and challenge the price he has charged. There will be a period of grace allowed with HMRC to allow for genuine mistakes to be adjusted against the builder’s VAT account, but this is time limited so if you suspect an error, act quickly.

ITEMS THAT CAN BE CLAIMED FOR INCLUDE:

  • Building materials, such as bricks, timber, tiles and cement
  • Air conditioning systems, dust extractors and built-in vacuum cleaners
  • Builders’ hardware, such as door furniture and rainwater goods
  • Joinery items, such as windows, doors and stairs
  • Glass and double glazed units
  • Bathroom accessories (towel rails, soap dishes etc)
  • Decorating materials (wallpaper, paint etc)
  • Gas or electrical systems designed to heat space or water (includes Agas and solid-fuel cookers if designed to provide heating)
  • Gas or electrical systems designed to provide ventilation, cooling, purification or dust extraction
  • Lifts and hoists
  • Light fittings (including chandeliers and outside lights)
  • Aerials and satellite dishes
  • Burglar alarms, fire alarms and smoke detectors
  • Curtain poles and rails
  • Fixed kitchen sinks, cupboards and worktops
  • Fixed floor coverings such as engineered wood and ceramic tiles
  • Permanent boundary fencing
  • Materials for installing services like water, gas and electricity
  • Plumbing and electrical installations including central heating, fixed heaters, fires and fireplaces, solar panels, bathrooms and showers
  • Saunas and swimming pools (if located inside the building)
  • Turf, plants and trees as detailed on an approved planning permission

ITEMS THAT CANNOT BE CLAIMED FOR INCLUDE:

  • Domestic electric and gas appliances, such as ovens, fridges, microwaves, coffee makers and dishwashers etc, whether built-in or freestanding
  • Lampshades and ornamental light fittings
  • Electrically operated garage doors (or door locks) and gates
  • Curtains and blinds
  • Carpets, underlay and carpet tiles
  • Audio equipment, built-in speakers, intelligent lighting systems, CCTV, TV receivers etc
  • Consumables (sandpaper, white spirit etc)
  • Bedroom furniture, bathroom furniture (ie vanity units), mirrors
  • Garden furniture, ornaments and sheds

Photo: Andrew Wall. The Glosters were able to claim back £22,000 in VAT following their oak frame and SIPs build

Also related to this article

15 comments

amanda tidd
Posted on
29/01/16

Very useful article,thankyou. We are about to tender out to builders, after taking 10months to get planning permission due to TPO's. We expect to get 5% vat as the building has been empty for 2years+, our project is a very extensive conversion and extension,including raising roofline, basically a new builder, so I feel it should be at 0%. Also we are having to pay an elevated council tax because the house is empty, even though we already pay council tax on the house we live in. Surely if you are in the process of a renovation council tax should be waved, and we should not be penalized. I totally agree with charging if houses have been left empty for years.
Graham and Mandy.
Sandy,
Bedfordshire.

richardakester
Posted on
30/01/16

Having completed our cottage we filled a claim under the DIY scheme April 2015 construction period 2014-2015,Rejected ,appealed rejected we are now waiting for a first -tier tribunal appeal date following Judges directions appeal number TC/2015/06528 should be fun. In brief our Holiday Cottage deed of grant from the local council said for tourism [Holiday] purposes the Custom and Excise defined the generic term Tourism as a Business, incorrect,laughable our business use was removed in 2013 six months before construction started, so even if the Customs win on definition we still do not have business use I keep our MP Sir Greg Knight up to speed, Think we are a test case like Mrs Jennings TC00362
Thank you for listening Richard

Libbie at Treiva
Posted on
13/05/16

We are refurbishing a derelict farmhouse that we know hasn't been lived in for 10+ years. Our builder is billing at 5% but we are sourcing all our own materials and planned to claim back 15% when its all done. Now we find we can't prove the farm wasn't lived in. The farmer moved out to live with family but the farm was still being worked so he didn't change his address or cancel utilities. NO PROOF=NO REFUND. please be wary when planning!
Our refurbishment has changed into more or less a new build because the building was hiding many terrible secrets, but our planning permission is for refurbishment so I doubt we can go down that route. Ideas on a postcard please.
Libbie

Chris
Posted on
18/05/16

Hi Libby. It sounds like you might have gone quite far down the road already with the works, in which case a knock down and rebuild might not be financially viable. But in terms of planning, demolish and rebuild is actually one of the richest sources of plots - and it's always possible to apply for a different type of scheme (though of course there's no guarantee of success). This guide isn't exactly what you're doing, but it might be of interest: http://www.self-build.co.uk/how-change-existing-planning-permission

CBandBB
Posted on
30/07/16

What is the position with claiming the VAT back from a new build if you then sell the property in say 12 months time or more? We are doing a demolish and rebuild, living on site in the existing bungalow which will be demolished once the house is complete and the new house will be our primary (& only) residence. If we claim the new build VAT back but then sell the new property are there potential issues with the tax office? We were going to go down the route of not paying CIL as we're self builders but you have to live in the property for 3 years from date of completion and we're not sure we will so we're now more than likely paying CIL to avoid issues with our local authority if we choose to sell within the 3 years. I'm reluctant to get into any hot water with HMRC if they have the same stipulations but can't find anything about it on a brief search. Any advice?

Gyp09
Posted on
12/11/16

Can we claim on a new garage separate from existing dwelling house but within boundaries of property.
From what I can read new garages are not eligible for VAT claim if an addition to property.
This isn't an addition to the property as not joined/attached. Or does this definition include garages regardless of whether they are joined/attached?

Andrew Hobbs
Posted on
15/11/16

@Gyp09 - We had a similar question in the Q&A section recently. I'm afraid a garage addition is only valid if it's considered part of a new dwelling in planning terms:

http://www.self-build.co.uk/zero-rated-vat

Andrew (Build It's Digital Assistant Editor)

Chris99
Posted on
30/11/16

Can we make a claim under the scheme if our planning permission places some restrictions on the building? - in this case there is a requirement that an occupant of the house works at the stables located on the same site.

Andrew Hobbs
Posted on
30/11/16

@Chris99

I have posted your question in the Q&A section as it's more likely to get a response there.

Andrew (Build It's Digital Assistant Editor)

Willoughby2
Posted on
22/12/16

We are about to undertake a major renovation that qualifies for 5% VAT, but will be doing some of the work ourselves. I had assumed that providing we give the evidence of the property being empty for over 2 years to the building supplier (with whom we have an account) we will be billed at 5% Vat. Is this the correct approach or do we somehow have to later re-claim 15% of the 20% we may have paid....

Frankygib
Posted on
02/03/17

Hi There,

I'm coming to the end of my self build which is a brand new detached house on a greenfield site. During the build I've just collected all the invoices and the time has now come to sort them out! I've downloaded the claim form and guidance notes but I've still got a couple of questions and would be very grateful for any advice.

1. Can I claim for materials, block paving, Wall bricks, tarmac etc, used in creating the driveway, paths and patios around the outside of the house?

2. I've sourced most of the building materials from two Builders Merchants with whom I've got accounts that I pay monthly. Will HMRC accept their itemised bills with their payment receipts or do I have to copy every item onto the HMRC form?

Thanks for reading this and your views will be very welcome.

Mike Apt
Posted on
10/06/17

We will be demolishing some derelict buildings and replacing with a new build on virtually the same footprint. They also have an asbestos sheet roof which will be removed by a specialist company. Can we reclaim vat on all this work. Mike.9.6.17

Ron Tomkins
Posted on
04/07/17

I am about to commence the construction of a timber framed bungalow/lodge which falls within the official definition of a mobile home. When the project is complete it will be my sole permanant residence. The work is covered under :"Permitted Development" thus it does not require Planning Permission. Can the VAT be reclaimed in a similar manner to conventional self builds?
Your input will be much appreciated. Ron, 04/07/2017

sallygraham
Posted on
14/09/17

Is there a time limit on the actual time the property takes to be built and issued with a certificate of completion. We are currently dwelling in a house that was begun 20 years ago, but is now only about to be completed. If we get a certificate of completion from the local authorities now (we have not sought up until now), will we still be able to claim for all of the eligible VAT - if we submit within 3 months? Will all work be covered over that period, or would only the work up until entering the property be concidered?

WJH
Posted on
22/11/17

where is the line between new build and refurbishment?
I'm converting a bungalow into a house, leaving part of the ground floor walls in place.
I've read a bit about the leave one wall up arrangement which is classed as new build - who decides what is and isn't a new build? if I leave a corner up is that new build?

Login or register to post comments

To post your comment you need to log in or register with the website. Registered users can log in using the form to the left. If you are a new user, please use the ‘Register’ form to the right.
Have your say:
Submit your comment