This Notice explains how to establish the appropriate VAT rate on building work and materials for contractors, sub-contractors and developers.

The construction of a new building and work to an existing building is normally standard rated. However, there are exceptions to this, inter alia:

• construction of new qualifying dwellings and communal residential buildings, and certain new buildings used by charities ― zero-rated
• conversion for a housing association of a non-residential building into a qualifying dwelling or communal residential building ― zero-rated
• alterations to suit the condition of people with disabilities ― zero-rated
• first time gas and electricity connections ― zero-rated
• conversion of a non-residential building into a qualifying dwelling or communal residential building ― reduced rate of VAT 5%
• renovation or alteration of empty residential premises ― reduced rate of VAT 5%
• installation of energy saving materials, grant funded heating system measures and qualifying security goods ― reduced rate of VAT 5%
• installation of mobility aids for the elderly for use in domestic accommodation ― reduced rate of VAT 5%

(These are just some examples; other works may also qualify for zero or reduced rating)

Amendments

Paragraph 7 (re: the conversion of premises to a different residential use) on reduced rated work has been amended at para 7.6 as there was uncertainty over the previous drafting.

Paragraph 8.4 has been revised to more accurately reflect the rules on the installation of building materials which are reduce rated.