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.
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 (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.
The building being converted must usually be a non-residential building (eg; a barn conversion). Residential also 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?
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
What you need to know
You must claim within 3 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.
Examples of items that you cannot claim for
This is not a complete list.
- Air conditioning
- Building materials that make up the fabric of the property (for example, 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
- 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
Aga/range cookers (Unless they are solid fuel, oil-fired or designed to heat space or water. Note: not all cookers are ‘space heaters’ because they incidentally radiate heat while operating. To be classified as such they must be fitted to a heating module or boiler)
Free-standing and integrated appliances such as: cookers, fridges, freezers, dishwashers, microwaves, washing machines, dryers, coffee machines
Audio equipment (including remote controls), built-in speakers, intelligent lighting systems, satellite boxes, Freeview boxes, CCTV, telephones
Consumables (for example, sandpaper, white spirit)
Electrical components for garage doors and gates (including remote controls)
Bedroom furniture (unless they are basic wardrobes) bathroom furniture (for example, vanity units and free-standing units)
Curtains, blinds (unless they are integral, that is, blinds inside sealed double-glazed window units),
Garden furniture and ornaments and sheds.
Please contact us if you require assistance with a DIY Housebuild project.