The good news for self builders and individuals who are converting a non-residential building into a home is that you can claim back most of the VAT paid out on your build. These rules were brought into place to level the playing field with those who buy a new build house from a developer and don’t have to pay VAT.
The arrangements for reclaiming the VAT are set out in VAT notice 431NB, VAT refunds for ‘do-it-yourself’ builders and converters. A copy of this form can be obtained from your local Tax Office or download it from www.hmrc.gov.uk. The scheme only applies to those building or converting for their own domestic use and occupation and isn’t available for property developers.
The claim must be made within three months of the building being completed and you only get one chance to claim, so you need to get it right first time. You can make a claim for most of the goods and materials bought from a VAT registered supplier which are incorporated into the building or the site.
Examples of What You Can and Canít Claim:
|Fitted Kitchen Units||Free-Standing kitchen units|
|Fitted bedroom furniture||Design fees|
|Burglar Alarms||Plant Hire|
New Build is zero-rated , which means that a VAT registered builder or subcontractor must zero-rate their work and not charge VAT on any labour-only or supply and fix contracts.
Although the builder or subcontractor will have to pay VAT when they purchase materials, they will be able to claim that back at the end of each month, or whatever period they have agreed with HMRC, and they must not seek to pass it on.
A self builder will have to pay VAT at full rate for the purchase of any materials that they make on their own account, this is largely recoverable at the end of the project.
How to Make a Claim
The process of VAT recovery is quite simple but it does have to be carried out quite thoroughly, and it is important that the self builder or converter keeps a complete record of all payments made, together with all invoices. Remember... the VAT claim is made in one go at the end of the project. If the claim is made before everything is finalised, there is no second bite of the cherry!