You can apply for a VAT refund on building materials and services if you’re:

• building a new home
• converting a property into a home
• building a non-profit communal residence, for example a hospice
• building a property for a charity

Many ‘DIY’ housebuilders and converters are currently unaware of a refund scheme which could potentially enable them to reclaim thousands of pounds of VAT.

The scheme, which puts DIY housebuilders in a similar VAT position to a person who has bought a finished building from a developer, allows DIY housebuilders and converters to reclaim VAT in specific types of building projects.  Only certain projects apply, however there are several conditions which must be met, ultimately to ensure that individuals are acting in a non-business capacity i.e. building the property for their own/ family use.

Whilst the wording “housebuilder” may be construed that you need to do the work yourself, this isn’t the case, simply commissioning the work satisfies the criteria to apply.

What can be reclaimed?

VAT can be reclaimed on many elements of these self-build and conversion projects and could save you thousands of pounds.  However, large amounts are often lost because the opportunity to reclaim the VAT is given low priority by the housebuilder during the project or overlooked altogether.

There are of course certain criteria that must be met to qualify for a refund.  It must be a genuine project for your own personal or non-business occupation or for the occupation of a family member.  Importantly the building must be “designed as a dwelling or a number of dwellings”. There has been a series of recent tribunal cases where HM Revenue & Customs challenged the claim on the basis that the planning consent included restrictions on the use or disposal and therefore a “dwelling” according to the definition for VAT purposes, had not been met.

Keeping good records

All VAT reclaimed must be incurred correctly and supported by relevant VAT invoices, it’s important to remember that the rates of VAT depend upon the nature of the cost, and the type of project. HMRC will not refund VAT if it has been incorrectly charged.

Keeping accurate records at every stage of the project is the key to making a successful claim – ensure you retain all invoices including those with eligible and non-eligible items as the VAT on eligible items on these invoices can still be reclaimed.

HMRC will expect to see original invoices with the full details about the order, with email orders/ receipts not sufficient and they must be directed to you, not your contractor or tradesperson – don’t use their trade account.

Certain items, such as carpets, furniture, white goods and professional fees (such as accountancy fees), are unfortunately exempt from the refund.

Submitting a claim

Once the project is complete and you have your certificate of completion or equivalent from the local authority, you are able to submit your reclaim to HMRC. However, this must be done within three months from the date of completion, further emphasising the importance of maintaining accurate records throughout the project, and only one claim per project can be submitted.  HM Revenue & Customs apply the time limits strictly.

And finally, HM Revenue & Customs will refuse to repay the claim if any of the conditions are not satisfied and will seek to apply penalties if the claim includes items which are not eligible – therefore it’s key to make sure you get it right.

If you would like advice on or assistance with making a claim through this scheme or on any other VAT-related matters contact us

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