Are you building your house by yourself? Well, we have some good news for you. Self-builders in the UK can reclaim VAT on eligible building materials and certain qualifying goods through HMRC's DIY Housebuilders' Scheme. You can recover much of the Value Added Tax (VAT) paid during the build process under this Scheme. This can help you reduce overall project costs.
However, you cannot claim most professional services and labour because qualifying construction services are zero-rated when supplied correctly. Let’s explain how you can VAT reclaim on new build, what expenses qualify, and how you can submit a successful claim.
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What is VAT Reclaim on New Build?
The DIY Housebuilders' Scheme allows you to build your own home to reclaim VAT paid on qualifying building materials. The idea behind this scheme is to put self-builders in a similar VAT position to buyers of newly built homes. When a builder builds and sells a qualifying new home, the sale is zero-rated for VAT. This means they do not charge VAT to the buyer but can recover the VAT incurred on eligible construction expenses.Why Can VAT Be Claimed Back on DIY New Build?
Newly built residential properties are generally zero-rated for VAT when sold by developers. The DIY Housebuilders' Scheme is designed to place self-builders in a similar VAT position by allowing them to recover VAT paid on eligible building materials.Can You Claim VAT Back on a New Build House?
Yes, if you are a self-builder in the UK, you can VAT reclaim on new build, but it depends on your role in the project. If you are building a new home for yourself, you can reclaim VAT on eligible building materials. This allows you to recover VAT that you paid on qualifying materials used in the construction of your home. Moreover, if you are using VAT-registered contractors to build your home, many construction services for a qualifying new-build are usually zero-rated. This means VAT should not be charged in the first place. Property developers are subject to different VAT rules. The sale of a qualifying new-build home is generally zero-rated. This allows them to recover VAT incurred on eligible construction costs while not charging VAT to the buyer.Who Can Claim VAT on a New Build?
You may be eligible for VAT reclaim on new build if you are building a new home from scratch, converting a property into a home, or building a non-profit communal residence. Reclaiming VAT on a new build is known as the DIY housebuilders’ scheme. Under this scheme, you can claim a VAT refund for each eligible self-build project after it has been completed. This scheme is designed for private individuals and not for property developers building homes for sale.What Types of New Builds Are Not Eligible for the Scheme?
To understand VAT reclaim on new build, it is important to learn the types of new builds that do not qualify for the DIY housebuilders’ scheme. You are not eligible to use this scheme if you have:- Constructed a property that cannot be used or disposed of separately due to a condition in the planning permission. Some planning permissions place restrictions on a building, and if your new build has this type of restriction, you are not eligible for the scheme.
- Constructed a property to sell or rent out, or for any other business purpose and do not intend to live in. This scheme is for people who build a home for themselves or their family to live in.
What Can I Claim VAT Back on a New Build?
One of the crucial aspects of a VAT reclaim on new build is understanding which expenses qualify for a refund. The building material costs qualifying for VAT claim are:Structure Materials
You can claim VAT on building structure materials, such as bricks, blocks, cement, concrete, roofing materials, timber, and insulation productsPermanent Fixtures
Items that become a permanent part of the new build are typically eligible for VAT recovery. To be in the list, materials must be incorporated into the building itself and bought specifically for the construction project.Mechanical and Electrical Installations
Fixture and fittings items are also included for VAT reclaim on new build. For example, doors, windows, plumbing systems, electrical wiring and fittings, central heating systems, and built-in kitchen units.How Much VAT Can You Claim Back on a New Build?
In the UK, you can claim the full 20% VAT paid on eligible building materials. There is no set limit on the amount that can be claimed, and the refund depends on how much VAT was paid on qualifying materials used in the build. However, not all costs qualify for VAT reclaim. You cannot reclaim VAT on items such as labour, tools, non-permanent fittings, or professional fees. Moreover, there is no maximum monetary limit, provided the goods qualify under the scheme.What Costs Do Not Qualify for VAT Reclaim on New Build?
The goods and services you cannot claim are:- Fitted furniture, such as a sofa or wardrobes
- Fitted kitchen furniture, except fitted kitchen units
- Home appliances, including gas and electrical appliances, such as freezers, washing machines, dryers, electrically operated doors, and gates
- Underlay, carpet, and carpet tiles
- Plant, equipment, and tools
- Greenhouses, garden ornaments, and sheds
- Building land
- Consumables that are not actually incorporated in the building
When Can I Claim VAT Back on a New Build?
For a VAT reclaim on new build, you must complete building your property. Once the home is complete and ready to live in, you can claim VAT back. Keep in mind that you cannot claim VAT during the build. HMRC accepts specific evidence that the building has been completed, such as a completion certificate or other approved documentation, depending on the circumstances. You must claim within 3 months after the home is completed, and this period starts from the date the home is considered finished. Additionally, you must claim under HMRC’s DIY Housebuilders Scheme.How Do I Submit My Claim?
Submitting a VAT reclaim on new build is a straightforward process if you prepare correctly. You can claim VAT back under the DIY Housebuilders Scheme by sending a single application to HMRC after the home is complete.Complete the Build
Before submitting the claim, you need to complete the new build.Gather Documents
Gather all the documentation, such as the original invoices, receipts, certificates, and supporting evidence required by HMRCComplete the Application
After collecting documents, fill out the form VAT431NB online or by post. You also need to provide copies of your invoices and other paperwork, like a certificate showing that the build is complete.Submit Before the Deadline
Lastly, complete your VAT reclaim on a new build by sending everything to HMRC by the deadline. Wait for HMRC to process it. You must submit the claim within HMRC's specified timeframe after completion of the property. Missing the deadline may result in losing your entitlement to a refund.What Will I Need to Submit With My VAT Claim?
To successfully submit a VAT refund, you need to provide supporting documents that prove the build and the VAT paid. Here is the list of documents you need to submit:- Complete VAT 431NB form
- VAT invoices for eligible building materials
- Proof of ownership of the property
- Planning permission approval for the new build
- Completion certificate from the local authority
What are the Common Reasons HMRC Rejects VAT Claims
HMRC may reject your claim or not pay in full due to several reasons, such as:- Missing VAT invoices
- Incorrect invoices
- Claim submitted after deadline
- Claiming non-qualifying items
- Claiming professional fees
- Missing completion evidence
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