VAT and DIY Housebuilders: What You Need to Know

Building your own home can be a dream come true, but navigating the VAT landscape can be tricky. Did you know that while new homes bought from developers are zero-rated for VAT, those who build their own homes don’t initially get the same benefit? Fortunately, the VAT DIY Housebuilders Scheme is here to level the playing field. Let’s dive into how you can reclaim VAT on building materials and make the most of this scheme.

Who Can Benefit?

If you have planning permission to:

  • Construct a new dwelling to be used as a family home for residential or holiday purposes by you or your relatives.
  • Buy a new building as a shell from a developer and fit it out for use as a family home for residential or holiday purposes by you or your relatives.

You can claim a VAT refund through the DIY Housebuilders Scheme. However, refunds aren’t available if:

  • The property cannot be sold or used separately due to a planning condition.
  • The property is intended to be sold, let, or used for business rather than being lived in by you or your relatives.

Providing Evidence

To claim your VAT refund, you’ll need to provide proof that your project is lawful. This includes:

  • Full planning permission.
  • Outline planning permission and approval of reserved matters.
  • Permitted development rights (e.g., a local development order).

If planning permission is in two parts, both must be supplied. If subject to a Section 106 Agreement, include that too. Remember, send copies, not originals, as documents won’t be returned.

Do You Need to Do All the Work Yourself?

Good news! You don’t have to do all—or any—of the work yourself. You can hire builders and tradespeople. The key is that the refund can be claimed on eligible goods that you, the DIY housebuilder, purchase and give to the tradespeople for the work.

Understanding the VAT Rates

Most building materials are charged at the standard VAT rate of 20% by suppliers. However, contractors charge VAT at the rate applicable to their services. If the contractor is zero-rated for constructing a new qualifying property, the building materials supplied by them will also be zero-rated.

What Can You Claim?

Your refund claim can only cover VAT on building materials, not on:

  • Fitted furniture.
  • Most electrical and gas appliances.
  • Carpets, underlay, and tiles.
  • Garden sheds, greenhouses, and ornaments.
  • Plant, tools, and equipment.
  • Consumables not incorporated in the building (e.g., sandpaper, white spirit).
  • Building land.

Claiming Your Refund

Ensure you only reclaim the VAT you’ve actually incurred, typically shown on your invoice. Keep detailed records of all invoices, bills, credit notes, and supporting documents using the schedule of invoices template available on gov.uk.

Making the Claim

For builds completed on or after 5 December 2023, you can make a single claim within six months of completion. Claims can be made online through HMRC’s service or using form VAT431NB. Online claims usually get a claim reference number within two weeks and are processed within three weeks from the date all information is received. Postal claims take slightly longer. HMRC will notify you if your claim is successful, and if not, why. You can request a review or appeal to the tribunal if needed.

Got questions about reclaiming VAT on your DIY housebuilding project? Contact Jon and the team at Jon Davies Accountants for expert advice and tailored support. Let’s ensure you’re making the most of your build!

 

 

 

 
 
 
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Any questions?

If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant