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VAT on New Builds

Barn Conversions
VAT relief is available for the conversion of a non-residential building into a dwelling, such as barns. VAT is charged by builders who do the work of conversion, and VAT is payable on the purchase of the building materials.

Listed Buildings
VAT (Value Added Tax) is normally levied at 20% on goods and services supplied in the UK but some are exempt and some are charged with 5% or 0%. ‘Exempt’ and ‘0%’ might seem to be the same thing but the difference is significant in the way the tax operates.

Alterations to Listed Buildings which are dwellings or which are being converted into a dwelling(s) are zero rated for VAT (0%). On alterations to your Listed building VAT collectors (HM Revenue & Customs) usually assess VAT on some of the builder’s work on the grounds that an alteration can be associated with repairing and maintaining the building. Repairs and maintenance carry VAT at 20%.

New House
Constructing a new house has always been free from UK VAT. ‘Self build’ home owners (people managing the building project themselves, instead of buying a complete house from a property developer) can claim back VAT which they have paid on building materials which they bought themselves.

Shell Units
‘Shell Units’ and other unfinished dwellings. The 100% VAT relief for new dwelling runs through all stages of construction, right up to completion (ready for occupation, and complying with Building Regulations). So fitting out a Shell Unit as a dwelling is ‘zero rated’, and the home owner may be entitled to present a VAT repayment claim to HM Revenue & Customs for VAT paid to the building contractor or for VAT paid on building materials used on a diy basis.

For example a former warehouse in Manchester now contains some 60 apartments which were bought from the site developer as ‘shell’ units. Many of the purchasers took advice from me about reclaiming VAT on the cost of fitting-out these bare shells to make them into habitable homes.

What documents do I need ?
Plans, invoices, delivery notes, retail till receipts, credit card slips, builders merchants’ account statements, etc. ‘Converters’ (of barns, etc) who employ contractors must also keep the Specification and other documents which describe and define the work done and, if the builder supplied the materials used in the job, some indication of the materials used.

The Planning Permission – for the construction or for the conversion of your property (‘shell unit’ or warehouse loft clients)

Plans and drawings of the development – including copies with the planning officer’s approval stamp on it. If the plans were drawn professionally detailed drawings, not just the ‘general arrangement’. Clients with ‘conversions’ should send an ‘Existing’ or ‘survey’ plan (before development) as well as the plans of the works.

Invoices and bills – for all of your expenditure you must send ‘originals’. Photocopies are usually unacceptable unless they are certified as duplicates by the business which issued them. File your invoices neatly and tidily for easy checking by the VAT inspector; you should get them back in the same order. If you have brought materials or fittings in from another country, send shipping/transit documents or a note of how they came in from abroad. We can claim EU VAT back.

Credit Notes
You may have credit notes for returned goods, shortages, breakages which are not your fault, price adjustments and so on. These must be declared, even though they usually reduce the amount of VAT you can claim.

Statements of Account
These will help to make sure that you have received all the invoices and credit notes. If you have an account with a builders’ merchant, send the monthly statements – they will also help the VAT Office to verify the expenditure and to check that you have not ignored the credits.

Certificate of completion
The documentary evidence required by the VAT Office is the Building Regulations certificate from the building inspector in the local authority. This proves that you have actually built a home and defines a cut-off point for eligible expenditure, except that you can claim for further essential work to finish the building – such as painting and decorating. It can also mark the start of the 3-month period after completion in which you must make the claim.