If you are constructing a new dwelling, you may be eligible to claim a VAT refund on materials.
If you enlist a VAT-registered builder to construct a new dwelling, the supply and labour may qualify for zero-rated VAT, however, if you are purchasing some or all of the materials yourself, you will be charged 20% VAT over the counter by a VAT-registered supplier. HMRC’s DIY Housebuilders’ Scheme exists so that this VAT may be claimed back from HMRC. If, however, you have been wrongly charged VAT on a supply, you cannot claim it back using this Scheme. Instead, you are advised to approach the supplier and request that the invoice is amended as appropriate.
You are eligible for the Scheme if you, for reasons other than business, have constructed a new dwelling (or have bought a new building as a ‘shell’ from a developer) to be used either by you or your relatives as a family home for residential or holiday purposes, or if you have constructed a new building that is intended for use solely for a relevant charitable or residential purpose which is non-business activity. Alternatively, you are eligible if you are making renovations or alternations that create a dwelling, e.g. converting a previously non-residential property into a dwelling, or restoring a residential property which has not been lived in for 10 or more years.
A new build is a building that has been constructed from scratch, which means that you will not be eligible to claim if you are constructing a dwelling on the site of a former building, unless you have either completely demolished the pre-existing building to ground level, or – exceptionally, if an explicit condition of the Planning Permission - the new dwelling retains no more than one façade (or two on a corner site) of the pre-existing building.
There are certain new builds or conversions that are not eligible, including a property that, because of a condition in the Planning Permission, cannot be disposed of, or used, separately.
You may only make one DIY VAT claim for the building – no amendments or additional submissions can be made, so it is important to make sure that you have all invoices and receipts that you intend to claim, before you make the submission. The claim must also be made no later than 3 months after the construction work is completed, and the 3 months will usually run from the date of the document that you are providing as proof of completion. HMRC are very strict on this deadline, and although in some cases it may be possible to provide an explanation for lateness and obtain an extension, it is recommended that you ensure that you have all documentation ready to go within the 3-month deadline.
The following documentation must be sent to HMRC with your claim:
- A copy of the Planning Permission
- A full set of building plans, including external elevations and internal layout plans
- A copy of the Completion Certificate, or other evidence that the build is complete, e.g. a temporary habitation certificate, a Joint Valuation Board Notice of Tax Banding, or a letter from your bank or building society
- All original VAT invoices and receipts that are eligible for refund, and listed on a schedule
- Additional evidence is required if you are converting a ‘shell’
You may only claim for building materials that are incorporated into a building, e.g. doors, fencing (if permanently erected around the boundary of the dwelling), fire alarms, fireplaces, heating systems, kitchen sinks and work surfaces, plumbing materials, sanitaryware, satellite dishes, solar panels, windows, and more. There are many items which you may purchase that aren’t incorporated into the building, and unfortunately VAT cannot be reclaimed – this includes, but is not limited to: free-standing and integrated appliances; electrical components for garage doors (e.g. remote controls); blinds and curtains. You also cannot claim for the hire of tools and equipment, or for professional services, e.g. architects, consultants, surveyors.
If you are a VAT-registered business, the claim should not be submitted on your VAT Returns, since all claims must go through the DIY Housebuilders’ Scheme only; all payments relating to a DIY housebuild must be treated as personal purchases if paid for by the business.