Should I be paying VAT on my project?

We often get asked about how and if VAT should be charged on Construction products into New Builds, Renovations and Barn Conversions. In the interests of your sanity we have summarised the rules below...however if you feel so inclined the full guidance can be found on HMRC website.

The construction of a new building and work to an existing building is normally standard rated.

There are a few exceptions which can be Zero rated:

1. Construction of dwellings and communal residential buildings and certain buildings used by charities
2. Conversion for a housing association from a non-residential building into a dwelling
3. Alterations to suit the condition of people with disabilities

and a few that are charged at a reduced rate of 5%:

1. Conversion (other than housing associations) of a non-residential building into a qualifying dwelling (this includes Barns and Offices)
2. Renovations or alterations of empty residential premises

Regardless of your VAT status as shown above when buying building materials you are more than likely going to be charged VAT, I hear you ask why? The simple answer is that unless it is affixed to the building that is qualifying then the provider cannot prove that it was actually fitted at that location.

That's why at Zakuna if you order products from us on a Supply only basis we are obliged to charge VAT, but if we supply and install the goods and you are able to prove that your project qualifies for a reduced rate we will not charge VAT...

The good news is that if you are an individual and your project does qualify for a reduced rate you can claim the VAT under the DIY Housebuilders Scheme, to do this the project has to be lawful and you need to prove your eligibility (Notice VAT431NB for New Builds and Notice VAT431C for conversions)

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What can I Claim VAT back on:

• All construction materials incorporated into a dwelling - e.g Concrete, blocks, bricks, insulation. sand, cement, plaster, timber, roofing, stairs, windows, guttering, doors, etc
• Electrical and plumbing materials
• Fitted furniture - eg kitchen units and worktops
• Extractor fans, MVHR
• Swimming pools and saunas - inside or linked to a ne dwelling
• Delivery charges - included on invoices for the above

What I cannot claim on:

• Equipment hire - e,g scaffolding, cranes, WC hire, access equipment
• Consumables - e.g paint brushes, tools
• Professional Fees - for example architects fees
• Kitchen appliances - including those integrated, for example hobs, ovens
• Bedroom furniture - such as wardrobes, drawers and dressing tables (unless fitted between two walls)
• Bathroom furniture - such as vanity units and freestanding units and drawers
• Carpets
• Electrical motors for blinds, garage doors or MVHR
• Delivery costs - when separately invoiced by a courier

Confusing? Believe it or not there is a reason why some items can be charged at a lower rate and others cannot. Put simply if it is not permanently fixed or incorporated into the dwelling and could be removed then you cannot reclaim VAT.

How to reclaim VAT?

• Ensure your project is eligible
• Ensure that you keep all VAT invoices and they are valid
• Ensure that you are charged zero rated on labour or joint labour and materials
• Ensure your claim is within 3 months of completion
• Engage the services of a professional to guide you and ensure that you can claim back the maximum amount

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Information Current as of 26/01/2021 and gathered from the HMRC website which is linked throughout.