Should I be paying 5% VAT on a renovation?

For most renovation works on houses and flats, your builder will be required to charge you at the standard rate of VAT (20%). However, there is an exception where your builder can reduce their rate to 5% VAT on a renovation. This is where the property has not been lived in for two years.

This is a simple guide, correct of November 2022, but you should be aware it is subject to change. In all cases, check with you architect and builder as early as possible.

Image above by Ian, architect in SE London on Design for Me. See his full profile and shortlist him for your renovation project here.

Rules for 5% VAT on a renovation

The dwelling must not have been lived in during the two years immediately before work starts. The reduction applies only to labour and building materials supplied by a VAT registered builder. It does not apply to items you purchase yourself (so make sure your builder buys them instead!)

How to reclaim VAT on residential renovations

Reclaiming the VAT will be undertaken by your builder, not you. Your builder will buy materials at a standard rate of 20% and will apply to reclaim the money later. You will, however, need to make sure you have evidence to make this application, for example, council tax records proving that the property has been empty for two years prior to work starting.

Is my builder required to comply?

You may get some pushback from builders who are not abreast of the rules. Refer them to the gov.uk website for clarification of the rules, otherwise, find a builder who is prepared to apply the correct rates.

Building materials qualifying for reduced rate VAT

The reduced rate of VAT only applies to building materials NOT goods, and your builder will also need to reduce their installation costs for these items. Here is a list of what are considered to be ‘building materials’:

Building materials subject to reduced rate of VAT include those that are:

• ‘incorporated’ in the building or its site
  • where fitting or removal would require the use of tools and would result in the need for remedial work to the building’s fabric or damage to the goods themselves;
• ‘ordinarily’ incorporated by builders in that type of building.

Does fitted joinery quality for 5% VAT?

Aside from kitchens, fitted furniture (finished or pre-fabricated) is specifically excluded from the definition of building materials above.

Other items excluded from reduced rate VAT

• Electrical or gas appliances (except those needed for space heating/cooling, heating water, ventilation and other devices listed in 13.6 here)
• Carpets are excluded. Other forms of flooring or floor covering, such as linoleum, ceramic tiles, parquet and wooden floor systems are considered building materials and benefit from reduced rate VAT.

Finding the right architect for your renovation

Here at Design for Me we specialise in matching clients with the right architect for their renovation project (and it’s free!)

• Quickly see who’s interested in your job.
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• Invite up to three for a no-obligation consultation.

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