VAT is one of the most confusing aspects of the construction process when building your own home in the UK. Many self-builders pay VAT on eligible building materials during construction and later reclaim that VAT from HMRC. This is where understanding the rules on VAT reclaim on new build becomes important. You may be eligible to claim VAT on eligible building materials used in a qualifying new build home under HMRC’s DIY Housebuilders’ Scheme.
Despite this, the rules are strict. You are not allowed to claim all items; typically, you usually only get one claim, and the deadline depends on when the building work was completed. Getting the right details from the start can prevent delays with your refund, rejected costs, or missing invoices.
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What is VAT Reclaim on New Build in the UK?
Before understanding how VAT reclaim on new build works, it helps to learn what VAT reclaim on new build is. The DIY Housebuilders’ Scheme allows self-builders to reclaim VAT on qualifying construction materials. This scheme is designed to put self-builders in the same VAT position as buyers of newly built homes. When a builder constructs and sells a qualifying new home, the sale is zero-rated for VAT. This means that the buyer is not charged VAT, but the builder can recover the VAT incurred on eligible expenses.
Can You Claim VAT Back On A New Build House?
Yes, building your own home is exciting. However, it is important to understand how VAT reclaim on new build can help you avoid costs you may be able to recover. In the UK, self-builders and custom builders can reclaim VAT on the construction of a new home. This allows eligible self-builders to reclaim VAT paid on eligible materials incorporated into the building. Furthermore, many qualifying construction services are zero-rated and provided by VAT-registered contractors for qualifying new builds. This implies that no VAT should be charged in the first place.
However, Developers are subject to different VAT rules. The first sale of a new home is zero-rated, allowing them to recover VAT incurred without charging it to the buyer.
What New Builds Are Eligible for the Scheme?
To understand VAT reclaim on new build, it is important to know which types of new build qualify for the DIY Housebuilders’ Scheme. If you have planning permission to do one of the following tasks, you can claim VAT for building materials:
- Build a new dwelling that serves as a family home for residential or vacation purposes, either for yourself or your relatives.
- Purchase a new shell building from a developer and complete the finishes to serve as a family home for residential or vacation use for you or your relatives.
Which New Builds Do Not Qualify?
Not all construction is eligible for VAT reclaim on new build, particularly when the property is constructed for rental, or business use, or does not meet HMRC’s residential criteria.
- Constructed a property that cannot be disposed of or used separately due to a condition in the planning permission (or a similar permission, such as a planning agreement).
- Constructed a property that you or your relatives do not intend to reside in, but rather to sell, rent, or use for any other business purpose. This includes a dwelling that was built because you need to live where you work.
Who Can Claim VAT on New Build in the UK?
You may be eligible for a VAT reclaim on new build for building materials and services if you are:
- Constructing a new home (a “self-build”)
- Converting a property into a home
- Building a non-profit communal residence, such as a hospice
- Building a property for a charity
What Can I Claim VAT Back On A New Build?
When discussing VAT reclaim on new build, one of the most crucial aspects you need to know is which expenses are eligible to claim. You can reclaim VAT on materials that are incorporated into the building to the property or site. These expenses include:
Core Building Materials
You can claim VAT on core building materials such as cement, timber, tiles, bricks, and roofing materials.
Eligible Fixtures and Fittings
Permanent boundary fencing; fixed floor coverings (such as linoleum); sanitaryware (baths, toilets, showers); and fixed kitchen cupboards, basins, and worktops.
Permanent Material
VAT can also be reclaimed on building materials incorporated into the building, which means they cannot be removed without causing damage. These materials are bought specially for the project and physically incorporated into the dwelling.
What Expenses Do Not Qualify For VAT Reclaim?
The following goods and services are considered non-qualifying expenses for VAT reclaim on new build
- Consultancy or project management fees
- Standard carpet or carpet tiles (hard flooring is generally eligible)
- Furniture and fittings such as tables, chairs and movable cabinets
- Kitchen appliances such as ovens, hobs, audio-visual equipment, washing machines, doorbells. (Many people wrongly assume built-in equals allowable.)
- Garden items include greenhouses and garden ornaments
- Consumables, including drills and other hand tools
Note: Depending on the primary function, cookers or boilers used for water or space heating (such as an AGA) can sometimes be claimed.
How Much VAT Can You Claim Back On A New Build?
You can reclaim the VAT that you actually paid on eligible building materials. Since the standard VAT rate is currently 20%, this is often 20%, but only where VAT was correctly charged on qualifying items. There is no maximum monetary limit on the amount that can be claimed, and the refund depends on the VAT paid on qualifying materials used in the construction. At the same time, not all expenses are eligible for a VAT refund. You cannot reclaim VAT on items such as professional fees, non-permanent fittings, tools, or labour.
When Can I Claim VAT Back On A New Build?
To qualify for a VAT reclaim on new build, the property must be fully completed. The VAT can be reclaimed once the home is finished and ready to live in. You cannot submit a DIY Housebuilders Scheme claim until the building has been completed.
HMRC accepts specific evidence of completion, depending on the circumstances, such as a completion certificate or other approved documentation. HMRC accepts a Building Control Completion Certificate or other acceptable evidence where one is not available.
You can claim within 6 months from completion of the building, which starts from the date the home is considered finished. Furthermore, you can also claim under the HMRC’s DIY Housebuilders Scheme.
How Do I Submit VAT Reclaim On New Build?
To submit a VAT reclaim on a new build, you must organise your final invoices and submit them to HMRC via the digital service or a postal form within six months of the completion of your building control.
Complete Your Build
Before submitting your application, you must complete construction of your new home. Your local authority typically issues a Building Regulations Completion Certificate once the construction is habitable, marking the official completion of the project.
Gather Supporting Documents
Collect all documentation supporting your build to demonstrate that it is both legal and eligible. This includes your final completion certificate, the building plans, and the complete planning permission documents. You are also required to retain all original itemised VAT invoices and receipts that demonstrate that you paid standard-rate VAT on eligible building materials.
Prepare Your Invoice Schedule
To calculate your claim, you must provide a detailed account of the VAT you paid on an official GOV.UK Schedule of invoices template. HMRC requires that each invoice displays the supplier’s VAT registration number and the VAT charged.
Complete the Submission
Submit your completed VAT refund application through HMRC’s online service or send the paper form, VAT431NB, by post. Once received, HMRC reviews it, verifies your invoice schedule, and may ask you to submit selected original invoices. HMRC may ask you to provide selected original invoices before approving your claim and paying the VAT refund directly into your bank account.
The Bottom Line:
VAT reclaim on new construction is a significant benefit for self-builders; however, it needs to be handled carefully. The scheme can help recover VAT on eligible building materials; however, it does not cover all project-related expenses.
Your claim must be submitted within HMRC’s deadline, your invoices must be accurate, and your property must meet the qualification criteria. By understanding the VAT reclaim rules for new builds at an early stage, you can streamline the process and prevent the loss of recoverable VAT.
Whether you’re just forming your company or already knee-deep in paperwork, our London-based accountants are ready to jump in. One quick call and we’ll figure out what you actually need.
Need Help With VAT Reclaim On New Build?
It can be challenging to manage VAT reclaim on new builds if you are uncertain about which costs qualify or what evidence HMRC requires. At LimitedCompanyAccountants, our accountants can review your invoices, identify eligible materials, verify your claim before submission, and help you avoid common errors that could delay your refund.
Disclaimer: All the information provided in this article is general in nature; it does not intend to disregard any of the professional advice.
