VAT refunds on self-build
Understanding VAT reclaim
Self building is without doubt one of the most affordable methods to attain your dream home. It is financially rewarding, not to mention the sense of achievement and pride associated with building your own home. One major benefit is that you are entitled to reclaim the VAT incurred on most of the building materials involved.
The rules for making a claim are straight-forward. However, before finalising your budget and starting your build, we recommend that you fully understand what's involved and what you can claim back. The arrangements for reclaiming VAT are set out in VAT notice 431N which can either be obtained from your local Tax Office or downloaded here.
The refund scheme applies to the construction of a new dwelling - a place where someone is intending to live- and the building must not be intended for business use. However, if you work from home- using one room as an office, then you are still able to make a claim.
What goods and services can you claim for?
Services provided by subcontractors, such as roofers, bricklayers, plumbers, carpenters, electricians etc. should all be zero-rated so you shouldn't pay any VAT on these. This also applied to any materials supplied by them such as roof tiles, bricks, central heating systems etc. You can claim for most building materials which you purchase yourself, with a few exceptions. As a rule of thumb, building materials must be incorporated into the building or site, meaning that you are unable to remove them without using tools or damaging the building.
Fitted furniture and some gas/electrical appliances are an exception to this. For example, you can claim for your fitted kitchen units, but not any associated appliances.
Other exclusions include VAT paid on work carried out by architects or surveyors, or fees relating to planning or project management. You also cannot reclaim VAT paid on services such as the hire of tools.
How to make a claim
You cannot claim as the work goes along - you have to wait until your build is complete. Therefore, it is advisable that you not only make a suitable allowance within your cash flow to cover VAT, but also keep accurate records as your project progresses. This way you can submit your claim as soon as the build is complete.
You can only make one claim to recover the VAT and it must be submitted to HMRC within three months of completion. Before making a claim, you should ensure your paperwork is in the right place and that you have obtained evidence of completion.
Evidence of completion
HMRC will accept a certificate or letter of completion from the local authorities, for Building Regulations purposes for example. A valuation rating or Council Tax assessment would also suffice. Banks and Building societies are also able to provide you with a completion certificate – they will be familiar with this process.
VAT invoices are required on everything being reclaimed and must show:
- Supplier's VAT registration number
- The quantity and description of the goods and/or services
- Your name and address if the value is more than £100
- The price of each item
Most reclaims amout to several thousand pounds and are very welcome at the end of your project! For more information please visit the HMR&C website.