vat on new self build and ground works

[Valentina]

Hello, 

I have found this forum today and I hope someone can give me some good news.

My partner and I are building our house where we would be living once finished. We have bought a land with planning permission and we are getting close to completion so i have started to put all the paper together for the VAT claim.

Today I read that construction services and ground works if related to the build should be zero rated, however our contractors have billed us 20% standard rate and we could potentially be 9,000 gbp out of pocket.

Below the services we have paid:

1) ground works for a sewage pipe redirection. Basically under the land there was a sewage pipe coming from a near development. One of the main condition of the planning application was that before starting to work on the land, we would redirect the sewage pipe to the adjacent bridle path. We submitted drawing to Southern Water, got the approval and redirected the pipe. The contractor charged us 20% vat, was the bill supposed to be "zero rated"? If so, the invoice is dated February 2022, can we do anything to recover this vat? Is the contractor liable for this and should correct this error provided it is an error?

2) Footing as per drawing. The same contractor charged us 20% standard rate for the service and the material (ie. concrete and Grab lorry to remove soil). Was it supposed to be "zero rated"? If so the invoices are dated March/April/May 2022, do you think we could recover the vat?

3) Construction service. My Partner bought all the building material himself, and we will claim back the VAT via HMRC. The contractor who build the house (brick work) charged us vat 20%. I read on the HMRC that building services should be zero rated, can you please just give me the confirmation? The builders finished their job in October so i hope i can still ask them to correct their invoices and refund us the VAT paid.

 

I am gutted that i have started to look at all documentation only now, but i would have expect that the contractors that do this for living know better then us. 

We are still at least 4 months from completion so my vat claim would be after that, also can you please confirm that i can claim for the vat paid in different years? ie 2022 and 2023?

 

So sorry for writing such a long message. 

I hope someone can help us to clarify and hopefully we can recover some money.

 

thank you very much.

Valentina

[bmj1]

"The contractor who build the house (brick work) charged us vat 20%"

 

All supply and fit work should be zero rated for VAT. You won't be able to reclaim this VAT from HMRC. You need them to void the original invoice and issue you a correct one, and refund you the overpayment. You might need to pay them an admin fee for the trouble.

 

Going forwards, any supply+fit works needs to be zero rated at invoice stage. Providing them a copy of your new build planning permission is usually sufficient for this.

Edited January 15, 2023 by bmj1

[nod]

As above You shouldn’t be charged vat on a new build 

But you can claim it back at the end As long as the company is vat registered 

Some companies insist on charging the vat Especially the smaller ones 

You have two choices To use them or not 

Unfortunately they will have already paid the vat in 

But all is not lost You can claim this back with your vat claim at the end 

[Kelvin]

17 minutes ago, bmj1 said:

"The contractor who build the house (brick work) charged us vat 20%"

 

All supply and fit work should be zero rated for VAT. You won't be able to reclaim this VAT from HMRC. You need them to void the original invoice and issue you a correct one, and refund you the overpayment. You might need to pay them an admin fee for the trouble.

 

Going forwards, any supply+fit works needs to be zero rated at invoice stage. Providing them a copy of your new build planning permission is usually sufficient for this.

 

Why won’t they be able to claim it back? I’m 

[nod]

23 minutes ago, nod said:

As above You shouldn’t be charged vat on a new build 

But you can claim it back at the end As long as the company is vat registered 

Some companies insist on charging the vat Especially the smaller ones 

You have two choices To use them or not 

Unfortunately they will have already paid the vat in 

But all is not lost You can claim this back with your vat claim at the end 

No chance of voiding They will have paid it in within three months of receiving payment 

Of course it can be claimed at the end of the build 

We had a block and beam company on our last build that wouldn’t zero rate 

But there total came to less than what we could buy the materials and hire a crane 

So we paid the vat and simply claimed it back at the end 

and UFH company also Wouldn’t budge on the vat But similar price for me to just buy the materials 

No problems with our vat claim 

[Temp]

1 hour ago, Kelvin said:

 

Why won’t they be able to claim it back? I’m 

 

Officially you can't reclaim VAT paid to a trade in error from HMRC. You are meant to go back to the trade. ..

 

https://www.self-build.co.uk/our-guide-claiming-back-vat-self-build/

 

 

Quote

 

Correcting VAT errors

If you find you have been charged VAT in error (by paying for VAT on labour on a new build project, for example) then you won’t be able to claim that erroneous payment back from HMRC. This is because the money will not have gone to them. As no VAT was due, it will have gone straight to your builder.

Your only recourse will be to go back to the builder and challenge the price he has charged. There will be a grace period allowed with HMRC to enabler genuine mistakes to be adjusted against the builder’s VAT account. This is time limited, however, so if you suspect an error, act quickly.

 

 

[Temp]

2 hours ago, Valentina said:

Below the services we have paid:

1) ground works for a sewage pipe redirection. Basically under the land there was a sewage pipe coming from a near development. One of the main condition of the planning application was that before starting to work on the land, we would redirect the sewage pipe to the adjacent bridle path. We submitted drawing to Southern Water, got the approval and redirected the pipe. The contractor charged us 20% vat, was the bill supposed to be "zero rated"? If so, the invoice is dated February 2022, can we do anything to recover this vat? Is the contractor liable for this and should correct this error provided it is an error?

2) Footing as per drawing. The same contractor charged us 20% standard rate for the service and the material (ie. concrete and Grab lorry to remove soil). Was it supposed to be "zero rated"? If so the invoices are dated March/April/May 2022, do you think we could recover the vat?

3) Construction service. My Partner bought all the building material himself, and we will claim back the VAT via HMRC. The contractor who build the house (brick work) charged us vat 20%. I read on the HMRC that building services should be zero rated, can you please just give me the confirmation? The builders finished their job in October so i hope i can still ask them to correct their invoices and refund us the VAT paid.

 

1) Yes that invoice should have been zero rated to you. 

2) Ditto.

3) You can reclaim the VAT on the materials you purchased. The contractors invoice should have been zero rated to you.

 

You can try writing to the contractors stating that HMRC have said they need to refund the VAT charged because this was "work carried out on a new dwelling" or in the case of the diversion was "Work closely connected to the construction of a new dwelling" (para 3.3.4 in VAT 708).

 

It might help if you also enclose a "certificate" which is essentially a letter to them certifying that that the work referred to in the invoice/quote was carried out in the course of constructing a qualifying new dwelling and should be zero rated in accordance with VAT 708. Include things like your contact details, the site address even if it's just "plot next to.." and the planning permission reference number. 

 

Good luck.

 

 

 

[Bozza]

Oh dear.  I hope you can recover that money.

 

When I submitted my VAT claim there was one or two things that went through that the rules perhaps indicated shouldn’t have been, eg transportation company who I got to deliver some timber, and some incomplete receipts etc.  But in fairness that was nominal sums of money.  I’m extremely surprised at @nod,s experience per his post that he was able to claim back VAT for wrongly charged supply and fit items - I was certain this wasn’t  possible .   But the HMRC does have a lawful duty to collect taxes that are due under any rules, and to refund taxes that shouldn’t be (namely VAT refunds).  
 

Hopefully you had a good relationship with your contractors , paid bills promptly, and looked after them when they were on site, as you are likely to need their help sorting this out, and be prepared to be in for a long haul to get your money back if it has to be from HMRC.  Would suggest not to try to blame contractors for not knowing the rules in some case some genuinely don’t know and some have never worked on self builds from scratch as self builds are comparatively rare.    

 

For any newer members at the start of their self build journey reading this, please take note of learning from others mistakes (we’ve all made them).
Having a working understanding of VAT rules, planning rules, etc etc is just as if not more important than understanding of the construction side of things.    Doing so minimises stress and costs and makes the journey far easier & simpler.

 

 

 

 

 

 

 

 

 

 

 

[Kelvin]

1 hour ago, Temp said:

 

Officially you can't reclaim VAT paid to a trade in error from HMRC. You are meant to go back to the trade. ..

 

https://www.self-build.co.uk/our-guide-claiming-back-vat-self-build/

 

 

 

Yes for the labour but they could still claim the VAT back for the materials albeit the invoice would need to detail the labour and materials separately. 

[Temp]

12 minutes ago, Kelvin said:

Yes for the labour but they could still claim the VAT back for the materials albeit the invoice would need to detail the labour and materials separately. 

 

Yeah that would probably work if the contractors won't oblige.

 

Although would HMRC check if the contractor has actually passed the VAT to HMRC ? 

Edited January 15, 2023 by Temp

[Valentina]

Thank you so so much everyone to be so helpful and clarify my doubt..now good luck to me and to all the people that are in the same boat as us .I'm gutted...we are taking about 9k ..I can't believe this....

[Valentina]

10 hours ago, Kelvin said:

Yes for the labour but they could still claim the VAT back for the materials albeit the invoice would need to detail the labour and materials separately. 

Hi Kelvin we sourced the material ourselves so my problem is only on labour unfortunately...

[Valentina]

11 hours ago, Temp said:

 

1) Yes that invoice should have been zero rated to you. 

2) Ditto.

3) You can reclaim the VAT on the materials you purchased. The contractors invoice should have been zero rated to you.

 

You can try writing to the contractors stating that HMRC have said they need to refund the VAT charged because this was "work carried out on a new dwelling" or in the case of the diversion was "Work closely connected to the construction of a new dwelling" (para 3.3.4 in VAT 708).

 

It might help if you also enclose a "certificate" which is essentially a letter to them certifying that that the work referred to in the invoice/quote was carried out in the course of constructing a qualifying new dwelling and should be zero rated in accordance with VAT 708. Include things like your contact details, the site address even if it's just "plot next to.." and the planning permission reference number. 

 

Good luck.

 

 

 

Dear temp can you send me the link where I can find the article 3.3.4 of vat? I'm planning to send the contractors the articles as reference....

[Valentina]

22 minutes ago, Valentina said:

Dear temp can you send me the link where I can find the article 3.3.4 of vat? I'm planning to send the contractors the articles as reference....

 

22 minutes ago, Valentina said:

Dear temp can you send me the link where I can find the article 3.3.4 of vat? I'm planning to send the contractors the articles as reference....

Temp sorry to bother again ...the contractor for pipe rediversion and footing had invoiced material and labour as a job ...didn't split material and labour ..should have he split zero rate for service/labour and 20% material (recoverable via HMRC)? Thanks again

[Conor]

20 minutes ago, Valentina said:

 

Temp sorry to bother again ...the contractor for pipe rediversion and footing had invoiced material and labour as a job ...didn't split material and labour ..should have he split zero rate for service/labour and 20% material (recoverable via HMRC)? Thanks again

Everything should have been zero rated.

 

It's debatable whether the diversion works for the pipe can be zero rated. It would be classed as modification of existing infrastructure so not eligible. Tho from reading here over the years, seems people have had utility modification works zero rated.

[Alan Ambrose]

>>> It's debatable whether the diversion works for the pipe can be zero rated. It would be classed as modification of existing infrastructure so not eligible.

 

I was just looking at UKPN's terms earlier and they specifically say that. It doesn't necessarily apply for other DNOs / services etc as they all seem to make it up as they go along.

[Temp]

3 hours ago, Valentina said:

Dear temp can you send me the link where I can find the article 3.3.4 of vat? I'm planning to send the contractors the articles as reference....

Vat708 is here. It can be very confusing in places so if it's not clear come back and ask..

 

https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708

[Temp]

2 hours ago, Valentina said:

 

Temp sorry to bother again ...the contractor for pipe rediversion and footing had invoiced material and labour as a job ...didn't split material and labour ..should have he split zero rate for service/labour and 20% material (recoverable via HMRC)? Thanks again

 

He should have zero rated everything to you. In the case of a mixed invoice (eg supply and fit) everything must be billed at the lowest rate which in this case is the zero rate for labour.

 

_if_ he had split it into two parts it might be possible for you to reclaim the vat on the materials part alone but I don't think HMRC make that policy. The problem is many trades know it should be zero rated to you do they pocket the VAT and don't pass it on to HMRC. If you then claim it back from HMRC the HMRC are down.

[Temp]

19 minutes ago, Alan Ambrose said:

>>> It's debatable whether the diversion works for the pipe can be zero rated. It would be classed as modification of existing infrastructure so not eligible.

 

I was just looking at UKPN's terms earlier and they specifically say that. It doesn't necessarily apply for other DNOs / services etc as they all seem to make it up as they go along.

 

3.3.4 in VAT 708 should cover a diversion provided you already have planning permission....

 

3.3.4 Work closely connected to the construction of the building

Subject to paragraph 3.3.6, your work is closely connected to the construction of the building when it either:

(a) allows the construction of the building to take place....

 

It does list some examples but also states not everything is listed and it will be considered on its merits.

 

We argued with Anglian Water and eventually got our water main diversion zero rated.

 

 

[ToughButterCup]

@Valentina, this thread makes for difficult reading.

You are going to have to be assertive and determined to get your VAT back from the contractors. The last they they will want to do is admit and have to correct an error: and then repay you.

 

Just a quick nudge: I 'feel' the likelihood of you needing to move in before completion. Do have look at this

[Kelvin]

1 hour ago, Alan Ambrose said:

>>> It's debatable whether the diversion works for the pipe can be zero rated. It would be classed as modification of existing infrastructure so not eligible.

 

I was just looking at UKPN's terms earlier and they specifically say that. It doesn't necessarily apply for other DNOs / services etc as they all seem to make it up as they go along.

SSE zero rated their bill for our connection 

[Alan Ambrose]

Yeah, as I said: I'm not suggesting all DNOs / utilities have the same policy - it's worth asking. FYI UKPN's policy says:

 

...the provisions of connection services to our customers are not regarded as construction services because the work is performed on our own assets. Consequently, there will be no change to the way in which we determine how VAT is applied to this job.

 

[Valentina]

On 15/01/2023 at 20:25, Temp said:

 

1) Yes that invoice should have been zero rated to you. 

2) Ditto.

3) You can reclaim the VAT on the materials you purchased. The contractors invoice should have been zero rated to you.

 

You can try writing to the contractors stating that HMRC have said they need to refund the VAT charged because this was "work carried out on a new dwelling" or in the case of the diversion was "Work closely connected to the construction of a new dwelling" (para 3.3.4 in VAT 708).

 

It might help if you also enclose a "certificate" which is essentially a letter to them certifying that that the work referred to in the invoice/quote was carried out in the course of constructing a qualifying new dwelling and should be zero rated in accordance with VAT 708. Include things like your contact details, the site address even if it's just "plot next to.." and the planning permission reference number. 

 

Good luck.

 

 

 

Hello can I seek another advise from all of you guys? We managed to recover more than 5k from one contractor ..however the brick work contractor after two month is acting very hostilely ... First he said he was going to sort it..then he bought time then now after another reminder became hostile... So I went through the service contract signed by contractor and my partner ... And in the payment terms shows only amount without vat.... And doesn't mention anything about vat charges ...it only says that it is responsibilty of the contractor to pay income and social security taxes ..no mention of vat...do you think I can say to the contractors that based in the contract he is in breach of contract as he applied taxes when they were not even mentioned in the contract? I don't know I'm trying to sort this as he owes us another 3k plus. ...thank you 

[Valentina]

Hello can I seek another advise from all of you guys? We managed to recover more than 5k from one contractor ..however the brick work contractor after two month is acting very hostilely ... First he said he was going to sort it..then he bought time then now after another reminder became hostile... So I went through the service contract signed by contractor and my partner ... And in the payment terms shows only amount without vat.... And doesn't mention anything about vat charges ...it only says that it is responsibilty of the contractor to pay income and social security taxes ..no mention of vat...do you think I can say to the contractors that based in the contract he is in breach of contract as he applied taxes when they were not even mentioned in the contract? I don't know I'm trying to sort this as he owes us another 3k plus. ...thank you 

[Temp]

@Valentina Not much help from HMRC..

 

https://community.hmrc.gov.uk/customerforums/vat/4c242183-93bb-ed11-9ac4-00155d975688