Question of VAT when you’re planning a new build home
With the economy back into a stronger position many new build properties are starting to pop up again, keeping many trades busy.
We are often asked to help new builders with their property from a tax and VAT position which is not something you automatically think about when starting to build – but, nevertheless, very important.
Our customers in construction often ask the question of whether they should charge VAT to their new build customers.
Work can be zero-rated if the property genuinely qualifies as a new self-contained house or flat.
It must be an entirely new building not attached with access through internal doors to an existing building. It cannot be a business use premises.
It must have proper planning permission, and other buildings on the site must have been demolished to create the new property
All the work must be related to the build and can include the demolishing and site preparations.
All labour can be zero rated. Building materials supplied and incorporated into the building will be zero rated.
Materials including bricks electrics, plumbing, fitted furniture all qualify. Moveable appliances and furniture are not allowable for zero rating.
If you are building a property the developer or separate tradesmen will satisfy themselves that you are meeting the conditions and will then be able to zero-rate your invoice.
At the end of the project you will have paid VAT in some items and these can be reclaimed on a special VAT reclaim. This must be completed within three months of the completion.
It’s a really good idea to get a copy of the form or to get some help at the very beginning of your project. This will ensure you maximise what you can claim.
The form is quite detailed and requires all receipts and proof of purchases to be kept, in order, and then sent off to HMRC at the end of the project. It’s much easier to keep on top of this as you go along rather than risk losing any receipts that you could use in your claim.
Building your own home can be very satisfying and rewarding. Living in your home after it’s complete and making it your main residence should allow you to sell it without paying any capital gains tax.
Repeating the process is also becoming a more common process for many self-builders, often moving onto their second or third self-build project.
Care needs to be taken in these circumstances to not turn the process into a business in the eyes of HMRC.