VAT Reclaim - Preparation
I know that many UK readers of this blog are interested in Value Added Tax (VAT) in relation to conversion projects. As we’ll be nearing the end of our own project over the next couple of months (fingers crossed), I thought a refresher on what the current policy is and what you need to do to make a claim was in order.
So here’s my brief & scrappy mbc summary of how to prepare for your VAT reclaim.
Read Notice 719.
Selected Highlights:
Non-residential building converters both professional and amateur can reclaim VAT on eligible goods and services, or in more words…
Developers can recover, through their VAT return, the VAT on their costs that relate to zero-rated or standard-rated sales. They cannot recover VAT that relates to exempt sales.
The Refund Scheme puts DIY builders and converters in a broadly similar position to a developer selling a zero-rated property, by refunding them the VAT on their main construction or conversion costs.
For conversions, you can also claim for the VAT on conversion services supplied to you.
Scope
If, [...] you are carrying out the conversion of a non-residential building [...] you can claim the VAT charged by your builder for converting the building.
Who does the work?
You need not carry out all, or any, of the work yourself. You can claim for eligible goods you buy and give to your builder to incorporate into the building (or its site) provided that the work is done before the date of completion.
Then skip to Section 7 and read 7.1 What is a non-residential conversion? to check the status of your conversion.
We’re then into the meat, What can we reclaim VAT on?
Starting with the exclusions:
- Fitted furniture, other than fitted kitchen furniture;
- Most electrical and gas appliances (Broadly you can claim for electrical appliances used for the purpose of heating, lighting, ventilation, security, hygiene, mobility or amplification in places of worship!);
- Carpets, underlay and carpet tiles;
- Garden ornaments, sheds and greenhouses;
- Plant, tools and equipment;
- Consumables such as sand paper, that are not actually incorporated in the building;
- Land.
So you can claim for building materials that are ordinarily incorporated into that type of building during the course of the conversion. Definitions of these terms following throughout section 8.
What VAT Rate should I be charged
I think I’ve already done this one to death on this site, but here we go again…
For conversions, a builder can sometimes charge VAT at the reduced rate of 5% or, if you are a housing association, at the zero rate.
Bear in mind that…
Claims must be made no more than three months after the construction or conversion is completed.
…
Normally [a building can be considered as completed when] it has been finished according to the original plans. In cases of doubt, a building can be regarded as still under construction up until the date when a certificate of completion is issued by the local planning authority.
That’s the background out of the way, assuming you’ve been keeping your receipts the next step is…
Complete the claim forms.
Either phone 0845 010 9000 and ask for a claim pack or download the forms from these links that I’ve generously provided:
VAT 431 part 1 Claim form VAT Refunds for DIY Builders
VAT 431 part 2A Description of building and quantities of goods and materials used
VAT 431 part 2B Description of services for DIY conversions
VAT 431 part 3 Goods, materials and services claimed for which the invoices show VAT separately
VAT 431 part 3 continuation sheet
VAT 431 part 4 Goods, materials and services claimed for invoices not showing VAT separately
VAT 431 part 4 continuation sheet
I’ll keep you updated as my own claim progresses…
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November 11th, 2008 at 11:12 pm
[...] VAT Reclaim - Preparation [...]
July 27th, 2009 at 10:33 am
I am doing a new build and have to meet Code for Sustainable Homes Level 3. Adding a whopping £3,000 in assesmnet and design fees to my project. Furthermore the result of the design will add cost to my build.
To my knowledge VAT must be paid on the consultancy services for the Code for Sustainable Homes assesment and design…. shouldn’t this be zero rated?!
August 3rd, 2009 at 11:07 am
I have to agree to quote “VAT refunds for ‘do it yourself’ builders and converters” - HMRC Reference: Notice 719
That seems very outdated in-light of experiences such as yours. What brought about the need to meet Level 3? - The planners or your own desires?
Much as I hate to be critical, the lack of ‘joined up’ thinking by government at all levels (being in Wales the Assembly loves to talk green but takes little action outside quangos and other (self) interested parties) is becoming more and more galling. I’d love less words and more action, & some real support for the likes of you and I.
September 14th, 2009 at 4:38 pm
Level 3 is not my want, rather local planning requirement.
Building my own house, I am keen to build a cost effective house, and that does have strong consideration on design to reduce energy consumption. For examplean intellignet lighting system that will turn lights off when rooms are not occupied, limit maximum power to 70% in most rooms, use led rather than multiple many GU10’s… I also plan 10m2 of solar thermal.
Despite all these I still will not meet level 3 unless I include a grey water system, remove the concrete first floor, ensure my office has x amount of light, baths must be limited in size, and a host of other things not only do I not need/want, but the cost will presently exceed the benefit.
Why the cost exceeds the benefit.. most suppliers are not yet savvy to the requirements, those that are charge a premium.
This said I have recently realised my planning, granted before the level 3 requirement is good for 90% of my build, it’s only the revised planning permision submitted for an extention to the original build that required a CSH pre assesment to be validated, albeit the assement was for the whole property.
Also rather oddly the planning case officer nor building inspector can tell me or think I need be adhere to CSH, so I’am follow their lead.
September 25th, 2009 at 11:45 pm
Notice 719 has now been replaced by HMRC with VAT 431C.
Am having some difficulty with a supplier whose price is to ’supply and fit’, who states he has never heard of reduced vat rate for building conversions. Did you had any experience of this on your ‘conversion journey’?
September 30th, 2009 at 10:35 am
I was lucky in that my builder & and one of his previous clients had already fallen foul of the 5% rules (having charged full rate VAT then had to untangle things) so it’s been pretty straight forward. None of my other suppliers who have also installed (plumber, electrician, flue installers etc.) have had a problem with this either although there have been a lot of conversions in my area over the last few years so perhaps they are justed used to it. What sort of supplier are you referring to? It may be that you need to pay them the VAT them reclaim the full amount.