Self build

[steady]

Hi we have a company building us a house oak frame etc but we are getting our own trades in to finish off , how do we treat the vat ie presume still zero ratedwith the trades ? Also I have purchased the drain pipes and treatment plant my self as that is something I can do but our accountant says we can’t claim the vat on that element (confused as was assuming we could )?

[Bonner]

Yes, trades must invoice zero rated for all labour and materials. You can buy materials and reclaim VAT as long as they are on the eligible list https://www.gov.uk/guidance/goods-and-services-you-can-claim-for-under-the-vat-diy-scheme

Your accountant is talking nonsense 🙄

[jack]

1 hour ago, steady said:

... but our accountant says we can’t claim the vat on that element (confused as was assuming we could )?

As a self-builder, you don't reclaim VAT in the same way a business would.

 

Instead, you claim back on materials, generally after the build is complete: https://www.gov.uk/vat-building-new-home

Any invoice including labour should be zero-rated by the invoice issuer. If you're accidentally or wrongly charged VAT by, e.g., a plumber, you won't be able to claim it back through the scheme above, so it's worth getting it right as you go along. 

Worth reading up on it all, as it's slightly complex, and you could miss out on a lot of money if you get it wrong!

 

Start with the VAT reclaim sub-forum (next level down from the one you've posted this in). The pinned post has an overview, but please note that the early part of the first post (about claim guidelines) might be out of date. The general consensus is that HMRC updated its internal guidance a couple of years ago, because suddenly HMRC's rejections for being too late suddenly dried up.

If you can't see that forum, post another couple of times, as it might have a minimum post count (maybe 20 posts?) before you can see it.

[steady]

Thanks for reply’s I think the confusion was as we’re a vat registered business we thought we could claim vat on drainage stuff now but accountent says no wait until we’ve finished build and we thought they were saying we couldn’t claim at all if that makes sense 

[jack]

2 hours ago, steady said:

Thanks for reply’s I think the confusion was as we’re a vat registered business we thought we could claim vat on drainage stuff now but accountent says no wait until we’ve finished build and we thought they were saying we couldn’t claim at all if that makes sense 

 

Unless your business is building your house, you need to keep it completely separate from your build. 

[JohnMo]

2 hours ago, steady said:

Thanks for reply’s I think the confusion was as we’re a vat registered business we thought we could claim vat on drainage stuff now but accountent says no wait until we’ve finished build and we thought they were saying we couldn’t claim at all if that makes sense 

Are you building via your business or another company setup to solely to build house? Not sure how that works as the company is a different entity to yourself in the tax world. The company would build for you, the client. But company needs to a building company not consultants as way of an example. Suspect it will be way more complex than it needs to be and possibly cost you more.

[Temp]

deleted my reply as I see you are a company.

Edited 13 hours ago by Temp

[Temp]

5 hours ago, steady said:

Thanks for reply’s I think the confusion was as we’re a vat registered business we thought we could claim vat on drainage stuff now but accountent says no wait until we’ve finished build and we thought they were saying we couldn’t claim at all if that makes sense 

 

The VAT and tax rules are different depending if your company is acting as a developer/builder or if this is a self build. You need to discuss which this is with your accountant. 

 

If the company is developing the property I dare say there are tax consequences of the company owning the house and transferring ownership to you later, not to mention issues with insurance and more that I'm not familiar with. 

 

However it sounds like you might be acting as developer in a personal capacity eg self building, because your accountant mentioned reclaiming it at the end. Companies normally reclaim VAT every quarter where as self builders reclaim at the end.

 

Note that self builders can only reclaim VAT if they are building a house to live in themselves NOT for sale/rent/lease out. Companies can only reclaim the VAT if the property will be sold, not rented or leased out. 

 

 

 

 

 

 

Edited 12 hours ago by Temp

[Big Jimbo]

I don't know, but could you instruct the Limited Company to build the house on your behalf ? The limited company buys all materials, and labour, and reclaims any Vat paid, every quarter, while billing you, Zero rated as applicable. Effectively, You have a main contractor building the house for you ? The company does not own the land, or the house. You do ?

[steady]

9 hours ago, Temp said:

 

The VAT and tax rules are different depending if your company is acting as a developer/builder or if this is a self build. You need to discuss which this is with your accountant. 

 

If the company is developing the property I dare say there are tax consequences of the company owning the house and transferring ownership to you later, not to mention issues with insurance and more that I'm not familiar with. 

 

However it sounds like you might be acting as developer in a personal capacity eg self building, because your accountant mentioned reclaiming it at the end. Companies normally reclaim VAT every quarter where as self builders reclaim at the end.

 

Note that self builders can only reclaim VAT if they are building a house to live in themselves NOT for sale/rent/lease out. Companies can only reclaim the VAT if the property will be sold, not rented or leased out. 

 

 

 

 

 

 

Thank you, it’s a building company building the house completely separate from our own vat reg company for us to live in eventually 

[JohnMo]

25 minutes ago, steady said:

Thank you, it’s a building company building the house completely separate from our own vat reg company for us to live in eventually 

 

So your(?) building company is the developer, or is it someone else's? Confused, building a house, it will sell to you once built?

 

More confused now than I was.

 

Have you gone to a building company to build your house?

 

Have setup a building company to build the house?

 

Or some different?

[steady]

No we’re not a building company 

[Big Jimbo]

@JohnMo Good questiions. Sounds like The firm building the house will simply be the main contractor. But i agree, it is confusing ?

I will try and put my own situation, which sounds similar.

I Own the land.

I have a building company. Limited. It is dormant but i file returns.

I instruct my building company to build the house, and i pay it, each time it issues me with an invoice.

The company, builds the house, Zero rating my invoices as applicable.

The company reclaims any Vat paid, every quarter as applicable.

At the end the company shows a small profit, and deals with that as its own entity.

I get the benefit of effectively not having to wait until the end to get my VAT back as a self builder.

The above is my intention...

[JohnMo]

So you are an individual that used a building company to build house, they have now finished. Additional trades should provide all man-hours and materials at zero rate vat. Material without labour are charged with vat and you claim that at completion of the build.

[JohnMo]

3 minutes ago, Big Jimbo said:

The above is my intention...

I just wouldn't go that route, 3 years of company returns, and full accounts, 3 monthly vat returns. Even doing lots of work on the house myself, my vat claim was £23k.  Like everything else keep it simple.

[torre]

59 minutes ago, Big Jimbo said:

I Own the land.

I have a building company. Limited. It is dormant but i file returns.

I instruct my building company to build the house, and i pay it

 

Even with the best intentions I'd think really carefully before going down this route (bluntly I just wouldn't go this way) as it's very likely to complicate your dealings with HMRC, who will look at the arrangement between connected parties and, in addition to the paperwork @JohnMo listed, may ask you to show that the relationship is truly commercial - for example, if they believe the company may have charged its director below market rate etc, undercharging and offsetting that against other sales, suggest you owe tax and NI on any discount they assign.

 

"Dear HMRC, I'd like to use my limited company to avoid personally paying reclaimable VAT on my self build at the point in time it would normally become due. Is that okay?" - does that sound like a good starting point, or a discussion you want to get into later with 10Ks - 100Ks at stake?