Building a Home? Less (VAT) is more!

The issue

When the father of modern architecture Ludwig Mies Van Der Rohe said ‘less is more’, little did he know that his aphorism would one day apply to VAT…

Building a house can seem like a mammoth undertaking to many, but with proper planning and bookkeeping there are many attractive tax savings to be made. HMRC will issue a full refund on VAT paid on eligible building materials and services. The principle behind this is simple – you don’t pay VAT when you buy a house that is already built so why should VAT be charged on a newly built home?

The relief also extends to non-residential properties that have been converted to become residential. To qualify, the materials have to be ‘incorporated’– i.e. affixed in a way that would require tools, or result in damage when removed. Aside from building materials, labour costs should already be zero-rated anyway, so invoices should be carefully inspected to make sure that VAT is not being charged on builders’ services.


The fine print

However this is not a carte blanche to splash out on a project worthy of a feature on ‘Grand Designs’. Caution should be exercised in reading the (admittedly long) list of fine print on forms VAT431NB (for new builds) or VAT431C (for conversions). The refund will not apply to a multitude of costs – this includes professional fees (such as architects’ fees), the costs of hiring machinery or equipment, or certain furniture/fittings (e.g. carpets, hobs or bathroom furniture).

Most importantly, the reclaim process is a race against time as only one claim can be made per project and that claim must be submitted no later than three months after the construction work has been completed. Organised bookkeeping will thus be critical to the success of most claims.




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