Did you know you can reclaim some of the VAT on building materials and services if you build a new home? That can really add up so it’s well worth doing. But, as with all these things, the rules can be a bit complicated. Here are a few pointers to help get you started.
1) When and what can you reclaim VAT on?
We’re not going to try and give you a complete list of all the things that can and can’t be claimed for here. It’s subject to change and we’d recommend you always check the latest details with HMRC before you begin your project.
For a new build to qualify, it needs to be separate and self-contained and it must be for you or your family to live or holiday in. So buy-to-lets don’t count, and if you’re just building to sell for profit, that doesn’t count either. Businesses don’t count, but you can have a room for a home office.
You can reclaim VAT on most of the materials for your build. But you can’t reclaim VAT on professional services like your architect, surveyor or project manager. Builders are different – see below. You also can’t claim against equipment hire.
2) Your builder and VAT
All building work on a new build should be zero rated. So there should be no VAT on the quote or bills from your builder. Just to be clear, you can’t reclaim VAT where there’s been none charged in the first place!
Your builder can reclaim VAT on materials they buy for a new build, provided they’re VAT registered. You won’t be able to reclaim VAT for materials provided as part of this service. So if materials are included as part of your builder’s service, make sure you’re not paying VAT.
With that in mind, don’t ask a non-VAT registered contractor to supply materials. They won’t be able to reclaim VAT for themselves, but you won’t be able to reclaim VAT on those materials either, so it’s money down the drain.
3) Budget accordingly
Before beginning your project, be clear whether you’re going to be reclaiming VAT on materials, or whether you’ll be getting materials through your building (and therefore, paying no VAT).
If you’re going to be reclaiming VAT yourself, you need to remember that you’ll still have to pay up front for things, INCLUSIVE of VAT. So you need to have those funds available as you go. You can’t reclaim your VAT until the project is finished. You’ll need to supply proof that it’s complete – a letter from your local authority is ideal.
If cash flow is tight, finding a builder who can charge you for materials without VAT as you go may be a better option for you.
You have to reclaim your VAT within 3 months of the project’s completion. Once submitted, HMRC will write to let you know when you can expect your VAT refund if your claim is successful. They will usually write to you within 6 weeks.
4) Keeping records is REALLY important
You MUST keep a really careful record of everything to do with your build. You’ll need to supply planning permission, building plans, invoices, bills, credits notes… And you’ll need to supply originals, not just copies of all these expenses. Electronic payment receipts or emails confirming orders are not valid VAT invoices.
Make sure the record of payment for anything you want to reclaim VAT on includes the supplier name, VAT number, invoice date, a description of the goods or services provided and the value of the invoice.
It’s your responsibility to make sure that VAT has been applied correctly. So check all paperwork carefully.
5) Make sure you get the right advice
You can only make one claim and mistakes can be very hard to rectify. Make sure you get it right first time!
Whilst your builder or tradesperson should, arguably, know the VAT rules, not all do. Be wary of taking their advice without double checking. It’s you, after all, that could end up out of pocket if you get it wrong.
The numbers involved can often make it well worthwhile getting the help of a VAT reclaim expert to make sure you claim back everything you can.
Remember, there is lots of information on the HMRC website and included within the claims forms themselves which will help you.