VAT Claim for Conversion in Scotland

[newhome]

3 hours ago, AndrewR said:

 Are you saying therefore that the supplier has to charge VAT at 20% and I claim 15% of this back

If your conversion is eligible for the reclaim scheme you claim 20% back on eligible materials when you do your reclaim. All self builders either building a new dwelling or an eligible conversion have to pay 20% VAT on supply only materials and then reclaim it later. 
 

If any of your work is labour only or supply & fit it must be charged at 5% VAT. You reclaim the 5% when you do the reclaim. What the form means by correct VAT rate is (for example) where someone has charged 20% VAT on labour instead of (for a conversion) it being charged at 5%. If you try to reclaim the 20% you will be directed back to your tradesperson to revise the invoice, refund you 15% and then HMRC will refund the 5%. 
 

Here are the relevant notes from 431C

VAT wrongly charged?

If you’ve been wrongly charged VAT, you cannot claim it back from HMRC. You should raise the matter with the supplier of the goods/services who charged you the VAT.
Supply­ only materials that you buy from a retailer will have VAT charged at the standard rate. Two rates of VAT may apply to the costs of services supplied to you by a VAT­ registered builder or contractor. These will either be a standard rate, or a reduced rate.
Eligible building materials that a business both supplies and installs follow the same VAT liability as the service. This means that if the service is reduced­ rated then the building materials will be too.
The Scheme will only refund the correct amount of VAT (that is the VAT that was properly chargeable). If you’ve been charged VAT at the wrong rate (for example, because VAT was shown as standard­ rated, rather than reduced­ rated) your claim will be rejected.
If the builder or contractor has charged the wrong rate of VAT on their services and materials that they installed, they should correct the liability. You’ll need to ask them to provide you with an invoice showing the VAT that has been correctly charged. But do not leave it too late. They have a limited amount of time to correct their VAT account with us, and are likely to refuse to make a correction if it is out of time. If you re­present the claim with an invoice showing the correct rate of VAT, we will make a refund to the extent that other aspects of the claim are satisfactory.
You should also be aware that you cannot claim back VAT on all building materials and services.

 

This will work as long as your conversion is clearly eligible for the reclaim scheme (not all are). If it’s not eligible (but still eligible for reduced VAT) then you can benefit from the reduced VAT rate of 5% for labour only or supply & fit work, but you cannot reclaim any further VAT and have to pay the full 20% on supply only materials. 
 

[Temp]

7 hours ago, AndrewR said:

 Are you saying therefore that the supplier has to charge VAT at 20% and I claim 15% of this back (since the project is reduce rated at 5%)?

 

At the end of the day conversions and new builds both end up paying the same 0% VAT. Its just the route to achieving that which is different...

 

Materials

In both cases (new and conversion) materials are charged to you at 20% and you reclaim all of the 20%.

 

Services

Services are treated differently:

Conversions: Builder/electrician charges you 5% and you reclaim the 5%

New Build: Builder/electrician charges you 0%. (nothing to reclaim).

 

Supply and fit (eg Materials and Services) on one invoice

 

Conversions: Builder/electrician charges you 5% on both labour and materials and you reclaim the 5%

New Build: Builder/electrician charges you 0% on both labour and materials (nothing to reclaim).

 

Quote

What confuses me is when the claim form guidance states that VAT must by applied by the seller at the correct rate otherwise it cannot be reclaimed:

https://www.gov.uk/vat-building-new-home/how-to-claim

Andrew
 

 

That's right.

 

Some trades will be reluctant to 0% or 5% rate their supply and fit because they will have paid 20% on the materials when they purchased them. However they MUST be persuaded. If you pay them 20% in error you cannot reclaim that back from HMRC. They can get the 20% back that they paid when they submit their VAT return. Sometimes it helps to give them a certificate (aka letter) with your planning reference details on it and suitable magic words like "I certify this work was carried out on a new build/conversion".

 

In summary:

 

If you buy PV panels yourself and pay an electrician to fit them to a property being converted you should pay:

 

20% on the Panels (which you reclaim).

5% on the electrician (which you also reclaim).

 

If buying panels from ebay check they can/will provide a VAT receipt!

Edited December 21, 2020 by Temp

[newhome]

15 minutes ago, Temp said:

20% on the Panels (which you reclaim).

5% on the electrician (which you also reclaim)

Good post @Temp. You explained it much better than me. I would just add that you absolutely need to confirm that your conversion is eligible for the reclaim scheme as if not you may decide to go down the supply and fit route to pay 5% VAT rather than buying materials in at 20%. 

[AndrewR]

Thanks everyone. Sorry for labouring the point, but I understand now.

Andrew

[newhome]

2 hours ago, AndrewR said:

Thanks everyone. Sorry for labouring the point, but I understand now.

 

To be honest it’s not that easy to get your head around the rules especially with a conversion. Many tradespeople don’t understand the rules either! 
 

[AndrewR]

When claiming back the VAT (on my Scottish DIY build), can someone tell me whether the Building Warrant is needed before the Tax Office will issue the money?

Question 16 on the form asks about the Building Regulations Completion Certificate, but it gives a "yes" or "no" option, and goes on to say that if it isn't provided then 'what will I be providing instead?'.

It is possible that I will not get a Building Warrant because some of the architect's specifications are impossible to meet and/or impractical.

Thanks,

Andrew

Edited May 24, 2021 by AndrewR

[newhome]

2 hours ago, AndrewR said:

 

It is possible that I will not get a Building Warrant because some of the architect's specifications are impossible to meet and/or impractical.

You should have your building warrant before you start any work on the house surely? It’s what defines the building method, specification etc. If your architect’s specifications can’t be met or are impractical then you need to amend the building warrant to show what you intend to do instead. It must still align to what’s been signed off in the planning application however and don’t expect those 2 areas to liaise. 

[recoveringbuilder]

I don’t know where you are in your build but you have to have a building warrant before you do the work, if you had a building warrant and have built differently to what was stated on it you will have to go for an amendment to warrant, I’m thinking this is what you are meaning and you’ll have to get the amendment done to enable you to get a completion certificate, without a completion certificate you will never be able to sell the property. 
If this is your problem I would see to it soon . You can claim back your vat on a new build with your council tax banding notice though.

Edited May 24, 2021 by recoveringbuilder

[newhome]

47 minutes ago, recoveringbuilder said:

You can claim back your vat on a new build with your council tax banding notice though.

Yeah I was thinking about that. Depends when they issue the entry into the VOA though as reading the first post this is a conversion so the VOA entry could be done well in advance of the property being finished, which means that the 3 months might be up very early in the project before a VAT reclaim is feasible. People I know bought a very old house that had been empty for decades and the council started charging them council tax before they had even started the work to renovate it. 
 

[AndrewR]

Thanks for the replies,

Okay, my architect put plans in and after a bit of liaison between he and the respective departments, I was granted approval by Planning and Building Regulations to go ahead with the restoration (it is a change of use). So, the respondents on here are saying (with regard to Building Regulations) that I now 'have a Building Warrant'. Okay. What I meant, and initially said, was the completion certificate that complies with everything in the Building Regs., i.e. something that is given to me at the end of the build after it has been inspected.

Can someone tell me whether this...finalisation document... is required to get VAT refunded at the end of the build? On the refund form does one have to submit it to get the refund?

A bit more background: I will comply with all the planning requirements, but not the requirement of building regulations. I am aware that I may not be able to sell the house afterwards. I don't care about this. I understand that I can request an amendment, but isn't there a fee to pay for this? Some of the things that the architect proposed are impossible to attain, due to the internal dimension of the building, hence my question.

Andrew

[newhome]

8 hours ago, AndrewR said:

Can someone tell me whether this...finalisation document... is required to get VAT refunded at the end of the build? On the refund form does one have to submit it to get the refund?

You can submit ‘other evidence’ that can be a temporary habitation certificate that the building regs team can issue. I don’t know how close it needs to be to the building warrant plans to achieve this. Or you can use the entry into the Valuation List that happens immediately before you start paying council tax. In both cases your claim needs to received by HMRC within 3 months of the document being issued.