Ask the Experts Grand Designs Q&A: April '09

Date Published:

09/03/2009

Working Out VAT

I’m putting together a budget for my self-build. What can I claim back VAT on and at what part of the build can I do this?

Mary Riley replies The VAT you can claim back on a self-build differs from the VAT you may claim back on renovations and conversions to existing property. For VAT purposes, I will refer to your self-build as a ‘dwelling’. To entitle you to claim back VAT on a dwelling, it must be self-contained living accommodation and cannot have internal access to any other dwelling or part of a dwelling.

You may claim back VAT on all of the building work for a self-build. The standard rate of tax to 30 November 2008 was 17.5 per cent and from 1 December 2008 to 21 December 2009 is 15 per cent. It will change back to 17.5 per cent on 1 January 2010.

You can claim back the VAT providing your house is a new-build dwelling and will be built for your own residence. If you have any intention of selling, leasing, renting, running the house as a bed and breakfast, you are not entitled to claim the VAT refund. You can claim back VAT on the dwelling when purchasing building materials and incorporated building materials – for example, fitted kitchen furniture, built-in, wired-in or plumbed-in appliances, such as boilers or wired storage heaters. You cannot include gas appliances or electrical appliances that are plugged in – for instance, washing machines and tumble dryers. And you can’t recover VAT on home furnishings, garden sheds, greenhouses and garden ornaments.

Providing the dwelling will be for your own residence, you claim back the VAT refund on the construction of the building. This can be from the very beginning, or when a pre-existing building is knocked down to ground level. If you are building a semi-detached property or if you’re extending an existing building to form an additional dwelling, you can reclaim the VAT. Bear in mind that VAT on building materials to build granny annexes that cannot be sold separately from the main house are not eligible for the VAT refund. Detached playrooms, swimming pools and workshops are also not eligible (they are not constructed as a dwelling).

If you are engaging with a builder, make sure you are charged the correct amount of VAT as you can only reclaim VAT that has been correctly charged. To claim the refund, you must retain all invoices and submit them with plans and planning permission, together with a fully completed form VAT 431 to HM Revenue & Customs. You are entitled to make only one claim, and it must be made within three months of completion of your build project. Ensure that you follow the HM Revenue & Customs Notice 719 (see hmrc.gov.uk for further information) and do not hesitate to contact HM Revenue & Customs if you have any concerns regarding the eligibility of any aspect of the VAT Refund Scheme.

This edition of Kevin's Column is taken from the April issue of Grand Designs magazine. If you would like to subscribe for as little as £9 then head here to find out more.