Hi Kris,

I have reached out to one of our experts with your query and will get back to you with a reply as soon as possible. If you require any general advice on reclaiming VAT in the meantime, head to https://www.self-build.co.uk/our-guide-claiming-back-vat-self-build

Andrew (Build It’s Digital Assistant Editor)

Hi Kris,

This is an interesting one and we’re following it up with one of our finance experts to get clarification, but I wanted to give you an initial response.

First up a caveat: I’m not a VAT expert and this can be a tricky area, so I would suggest it’s a good idea to contact HMRC to get their official view, if possible. Or failing that speaking to a specialist VAT consultant.

My personal reading of the VAT rules is that, on a new build project, demolition of an existing building is exempt from VAT if it is done ‘in the course of construction’ or to provide/improve an access point.

Reading through the guidance, it mostly deals with situations where the replacement building is going on top of where the old one was. In such cases, the demolition would naturally take place before the new build work and everything would be pretty clear.

Nevertheless, it seems to me that you should usually be able to claim for a demolition done after the works, provided it formed part of the planning consent. To me this would imply that the demolition is essential to enable the works. You could also potentially argue that it counts as ‘site clearance’ in the course of the works, which is also VAT exempt.

Of course, you would need the works to be completed prior to gaining the completion certificate. It’s also worth bearing in mind that plant hire doesn’t count for the VAT exemption.

That’s my layman’s interpretation but really I would strongly advise you to seek clarification from HMRC. Hopefully we’ll hear back from our finance expert soon and we can give you more definitive response.

Chris (Editor, Build It)

My understanding of the VAT guidelines is that existing house demolition forms part of the site clearance and, as such, is a qualifying expense in respect of VAT reclamation. These works would be termed as “closely connected” as they are part of the enablement works for allowing your new house to be constructed. The clause you should look at is 3.3.4(a) within the VAT Notice 708: Buildings and Construction.

Tim Doherty (Build It expert)