When it comes to building your dream home, we find that clients have enough challenges to overcome without a 20% VAT bill being an added burden. Fortunately, when building a home for you and your relatives to live or holiday in, whether that’s constructing from scratch or converting an existing building, then it is likely you will be eligible to recover the VAT charged on the supply of certain building materials and services using HMRC’s DIY Builders and Convertors VAT Refund Scheme.
What does the scheme cover?
The scheme is not restricted to new builds but extends to non-residential conversions, which includes dwellings that have lain empty for the last 10 years or more. Also, a property which you intend to use for family holidays may also be included in the scheme when it meets certain conditions.
There are several conditions that must be met in order for a DIY claim to be successful. In particular it is crucial that planning permission is obtained prior to any building work starting.
What costs qualify for VAT recovery?
It is important that your contractors apply the correct VAT rate to their services; HMRC will exclude any invoices where VAT has been charged incorrectly from the refund claim.
Many of the services supplied in connection with a new build or a conversion will qualify for the zero or 5% reduced rate of VAT. Having a conversation with your contractors before work starts will save any issues later in the project.
The scheme allows for recovery of VAT charged on work carried out to the fabric of the property certain works within the grounds of the property, and on certain building materials, for example, fitted kitchen furniture, wooden flooring and solid fuel cookers.
What does not qualify?
There are certain costs that are not eligible for VAT recovery such as:
- Professional fees
- Hiring of machinery – such as diggers for foundation work
- Fitted furniture – carpets, some electrical appliances
The claim process
Applications must be submitted to HMRC no later than three months after the completion date.
The application form contains many detailed questions and different schedules must be included for each VAT rate charged on goods and services purchased.
Several original documents must accompany the claim including:
- original VAT invoices for all services and goods.
- where applicable, evidence that the property has been empty for ten years before the work started.
- a copy of the planning permission and a full set of building plans.
- completion certificate. Often VAT invoices can go astray as you focus on the construction not the bookkeeping – we recommend that a file be maintained that will help keep your invoices safe, clean and dry. This will make the claim process much smoother.
How can we help?
AAB’s Indirect Tax team can manage the process from start to finish, leaving you more time to enjoy your home while we secure a VAT refund on your behalf.
We will ensure that your claim is accurate and complete at the outset, and will deal with any queries HMRC should raise. We have experience of HMRC partially rejecting claims where we have argued successfully against their reasons and secured further refunds.
If you require further information or support with the submission of a DIY Housebuilders claim, please contact Debbie Smith, Indirect Tax Assistant Manager (email@example.com) or your usual AAB contact.
To find out more about Debbie, click here