Self build VAT - how to deal with tradesmen?

[Randomusername]

I’m starting out on a self build of two new build properties. I will be acting as main contractor, directly engaging individual trades and purchasing materials myself wherever possible. 
 

I’m obviously keen to ensure that I can reclaim any VAT wherever possible to do so, but I’m struggling a little to work out the best way to do so when engaging trades. 
 

I have obtained a suitable quotation from a local fencing contractor for the erection of a new boundary fence to separate the plots from the neighbouring property (the seller’s). 
 

His quotation is not detailed - it’s a basic price for the job, inclusive of materials etc,  and I have confirmed with him that he is not required to be registered for VAT. 

 

So the question is, how do I make sure that I am able to reclaim the VAT paid on the materials?

 

Is it enough that he provide a detailed invoice with materials listed with VAT breakdown?

Or do I need to insist on purchasing/paying for the materials myself and the labour separately?

 

Many thanks for your assistance. 

[recoveringbuilder]

If he is not vat registered and you get him to provide the materials I doubt you will be able to reclaim the vat on them, normally what would happen is (if he was vat registered) he would bill you for supply and fit and zero rate it to you. I would imagine the best plan would be for you to have an invoice for the materials in your name, if he buys them and he’s not registered he cannot reclaim the vat. 
The other thing is, are you building the two houses to sell? I don’t think you can reclaim vat if that is the case.

[Randomusername]

Thanks for the confirmation. I need to get the fencing contractor to understand that then - it’s already surprised me just how many of them are completely unaware of the ability to reclaim the VAT on qualifying new builds. 
 

For the purposes of tax I will be intending to live in one of the properties for some period of time after completion. I own another property but I live here temporarily due to the present pandemic - as soon as I can move onto site I will have to do so as this house will need to be rented out again. So at least one of the houses will legitimately become my principle residence. 
 

If the second plot is kept and that property is completed, my parents will be likely be moving into it, but that point is completely unpredictable at this time. 

[Thedreamer]

I've nearly finished our self build on the basis of just dealing with subcontractors.

 

Buying materials yourself takes time if you are not familiar with the products.

 

The only materials I didn't supply were the brickies stuff, underground drainage pipes and the staircase and balustrade. Sometimes I just had to be realistic as to what the wastage would be and difficulties knowing on the quantity order. All these trades charged VAT at 0%.

 

Contractors not registered you should buy the materials. Some contractors that are not registered might want you to buy the materials to keep their turnover under the registration limit.

[nod]

Probably 99% of sole traders are not vat registered So if you don’t purchase the materials yourself 

The vat is hidden within there quote 

[Temp]

8 hours ago, Randomusername said:

His quotation is not detailed - it’s a basic price for the job, inclusive of materials etc,  and I have confirmed with him that he is not required to be registered for VAT. 

 

So the question is, how do I make sure that I am able to reclaim the VAT paid on the materials?

 

Basic VAT rules for a new build are..

 

* Labor MUST be zero rated to you. You cannot reclaim it from HMRC if you pay in error.

* You can only reclaim VAT on materials you buy. Eg it must have your name on the VAT invoice.

* If you get someone to do "supply and fit" then BOTH labor and materials MUST be zero rated to you. The contractor can reclaim the VAT he paid, or rather it will be accounted for in his regular VAT return.

 

So since your man isnt VAT registered your best bet is to buy the materials yourself and "free issue" them to him to errect for you as others have suggested.

 

7 hours ago, Randomusername said:

For the purposes of tax I will be intending to live in one of the properties for some period of time after completion.

 

Is the CIL operating in your area? If so you must live there for 3 years after completion if you claim the self build exemption.

 

7 hours ago, Randomusername said:

If the second plot is kept and that property is completed, my parents will be likely be moving into it, but that point is completely unpredictable at this time. 

 

I believe you can use the self build VAT reclaim scheme if building a house for a relative BUT not if it's a build for sale. I'm not sure the same applies to the CIL. Your parents might have to claim the exemption. 

 

Beware the CIL rules. One missing form and you can become liable to pay it.

Edited July 27, 2020 by Temp

[Randomusername]

Thanks all for clarifying the VAT rules. I’ll go back to the contractor and clarify that he’s happy to work on a labour only basis with me supplying the materials according to his stipulation. 
 

@Temp - fortunately no CIL implementation in this area so that’s one thing I don’t have to worry about. 
 

I’ll be clarifying the VAT situation as regards builds for relatives, should we decide to go for doing the second plot build. 

 

Edited July 27, 2020 by Randomusername
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