This is a simple and concise guide to understanding VAT on new build houses. Please note that there is different guidance in relation to conversions, which are also, sometimes, eligible for a VAT refund.
New builds pictured are from architects on Design for Me. Click on the images to see their full profile and invite them for a consultation about your project!
What counts as a ‘new build’ house?
According to HMRC, a new build eligible for VAT exemption is defined as:
‘a building constructed from scratch which does not incorporate any part of an existing building.’*
- from the VAT431NB VAT refunds for DIY housebuilders – Claim form for new houses.
Are there any situations where a new build house would not qualify?
Yes, your new house will only be eligible for VAT exemption if:
- It’s for you and/or your family to live or holiday in.
- You do not intend to sell it on or let it out.
- It is separate from other buildings and self-contained.
- Aside from a single room that can be used as a home office, it will not be used for business purposes.
What about other new buildings in the same grounds as our new house?
No, they will not qualify – with the exception of a garage, providing it is constructed at the same time as the main house and intended to be used at the same time as the house. So, unfortunately, your detached workshop/swimming pool/annexe will not be VAT exempt.
New builds pictured are from architects on Design for Me. Click on the images to see their full profile and invite them for a consultation about your project!
So my new house will be 20% cheaper, right?
Firstly, you should be aware that the scheme operates as a refund process – you will need to pay for the building materials, including VAT, upfront and make the refund claim at the very end of the project. This will affect how much finance you will need to make available during the course of the project, so bear this in mind. However, there are some things that you will not be able to claim for…
Generally speaking, if you tipped your house up-side-down and shook it, anything that falls out would not usually qualify for VAT exemption. Neither does fitted furniture (except kitchens), some electrical and gas appliances, carpets or garden ornaments.
HMRC’s VAT431NB VAT refunds for DIY housebuilders claim form for new houses gives a more comprehensive guide to what materials would and would not be included – refer to section three.
What about labour costs?
You should not be charged VAT for construction services (labour) or the building materials they provide. This is because most (if not all) of their services and building materials are eligible for zero-rating. In other words, they will not have to pay any VAT and so this should not be passed on to you. Make sure you discuss VAT in detail with your builder before you employ them, so they can manage their tax affairs to avoid unnecessary VAT payments during the course of the project.
Architect’s fees?
Professional fees – e.g. architects, surveyors or engineers – do not qualify for VAT exemption. However, you may find that some small practices or sole traders are not VAT registered, which means they would not charge VAT on their fees in the first place.
What will I need to make the application?
I’d strongly recommend reading through the VAT refund claim form at the beginning of the project. This will help you plan for the eventual application. For example, you will need to keep all the invoices for building materials you are claiming for, and all these invoices will need to show the amount of VAT paid shown as a separate figure. It’s also much more straightforward if all invoices are in your name, as otherwise you will have to explain why (on the claim form). When submitting the form you will need to provide:
- Planning permission confirmation
- A completion certificate from Building Control
When should I make the claim and how long will it take?
You should apply within three months of completing the work. Please note that you will need to provide the Completion Certificate issued by building control.
You’ll usually get the refund within 30 working days of sending the claim.
If you are still unsure about VAT liabilities in relation to your project, a good architect will be able to advise. Here at Design for Me we can match you with the best design pros for your project and arrange initial consultations for free. Use the form below to get started and we’ll be happy to help!
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