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VAT refunds on self-build new homes or non-residential conversions
If you are building a new home or converting a building into a place to live, you might be able to reclaim the VAT you have paid on some of the building materials and conversion services you use. This applies whether you do the work yourself or have it done for you.
Projects the VAT refund scheme applies to
When budgeting for your project, read this article carefully. Your project might not qualify at all, or you might not be able to reclaim VAT on everything. In any case, some supplies or services by builders might already be zero-rated (already VAT-free) or at a reduced rate of 5 per cent, so you might not get the savings you are expecting.
Construction of a new dwelling
This refund scheme applies to the construction of a new dwelling - a place where someone is intending to live. It also applies to the conversion of a non-residential building into a dwelling. The works must be carried out in the UK - including the Isle of Man, but not the Channel Islands. The building must not be intended to be used for business purposes.
There are strict definitions for what 'construction of a new dwelling' means. In particular, it has to be self-contained accommodation - a 'granny annex' would not be eligible for relief.
Finishing a building
You can still make a claim if you add to or finish a partly completed new building. This could be, for example, where you buy a shell from a developer and fit it out, or have it fitted out by a builder.
You can’t, however, claim for any extra work you do on a completed building bought from a builder or developer - such as adding a conservatory, patio, double-glazing, tiling, or a garage.
Where the building is a conversion, it must be of a non-residential building. That means a building that has either never been lived in, or hasn't been lived in for the last ten years - not even on an occasional basis as a second home. Illegal occupation by squatters doesn't count, however, and you are allowed to live in the property while the work's being done, as long you move in after the work has started.
There are strict definitions for what constitutes a suitable residential conversion.
Communal buildings and charity buildings
Although the scheme doesn't apply to a building that's going to be used for business purposes, it may apply to the construction of a communal residential building - such as a new care home - or a charity building.
Who can use the scheme?
Anyone who buys eligible goods for a project that qualifies for this relief may make a claim. It doesn't matter who actually does the work - you can use builders to do some or all of it for you.
Who can't claim?
You can't claim a VAT refund on your DIY building work if you are using the building for business purposes. So you can't claim, for example, if you:
- are a speculative developer
- are a landlord
- run a bed and breakfast business
- run a fee-paying care home
- are a membership club or an association
- run a fee-paying school
If you work from home - using one room as an office - then you can still make a claim.
Goods and services can you reclaim VAT on
You can only claim for building materials. HM Revenue & Customs (HMRC) uses a strict definition for building materials. Building materials are incorporated into the building or conversion itself, or into the site, which means that you can't remove them without using tools and damaging the building and/or the goods themselves.
However, there are a number of exceptions. Items such as fitted furniture, some electrical and gas appliances, and carpets or garden ornaments do not count as building materials.
You can claim back the VAT paid on building materials bought in any member state of the EU (European Union). For the purposes of your claim, you should convert the amount of VAT you have been charged to sterling. You can also claim back the VAT paid on importing building materials into the EU. When making your claim you must provide evidence of the VAT paid, together with the originals of any shipping or transit documents showing the importation of the goods from abroad.
If you are constructing a new building, then your builder's services should be zero-rated anyway. You won't pay any VAT on their bill.
If you are converting a non-residential building into a home, you can reclaim the VAT charged by your builder. For conversions, a builder can sometimes charge you a reduced rate instead of the standard rate of VAT.
You can't reclaim VAT paid on any professional or supervisory services, like work carried out for you by architects or surveyors, or any other fees for management, consultancy, design and planning. Similarly, you can't reclaim VAT paid on services such as the hire of plant, tools and equipment.
More useful links
Provided by HM Revenue and Customs