Have you noticed just how many building sites are popping up around us? It’s a sure sign of the economy getting back into a stronger position, helping to keep many local, smaller building firms and their contractors and suppliers busy.
One of the first questions we’re often asked by our builder clients is whether they should charge VAT to their new-build customers. The answer is that work can be zero-rated if the property genuinely qualifies as a new self-contained house or flat.
There are, of course, criteria:
- it must be an entirely new building not attached with access through internal doors to an existing building
- it cannot be a premises for business use
- 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, plus building materials supplied and incorporated into the building will also be zero rated. Materials which qualify include bricks, electrics, plumbing, and fitted furniture. Moveable appliances and furniture, however, 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 on 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, to 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 the receipts that you need for 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.
Many self-builders repeat the process, often moving onto their second or third self-build project. Care needs to be taken in these circumstances not to turn the process into a business in the eyes of HMRC.
For help and advice, don’t hesitate to get in touch!