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Introduction

 

Note - this is not a definitive guide, but made up of advice and guidance taken from various sources and the experiences of forum members. Any reliance you place on the information here is solely at your own risk. Please contact HMRC on 0300 200 3700 for clarification of any issues you may have. 

 

This guide is intended to help self builders and those involved in eligible conversions understand the VAT rules that relate to their project, in particular the VAT refund rules. It will be updated as and when new information becomes available. If you have any information that you feel is important to include please include it in a new post.

 

Note that it does not cover the regulations if you have set yourself up as a VAT registered trader and have raised invoices through a company. Nor does it cover renovations ineligible for refunds through the DIY Housebuilders Scheme although there are certain types of renovations that are eligible for reduced VAT rates at source, for example renovation work on a dwelling that has been empty for 2 years, but you cannot claim through this DIY scheme. 

 

To keep this guide relatively tidy new posts may be deleted once read and the information acted upon. Note that I am not a VAT expert in any way but have based this guide on my own experience of reclaiming VAT for my self build, from reading information about the VAT regulations, and the experiences of others.

 

This guide is not intended to cover all of the information included within the claim forms. There is an extensive amount of information included in the notes sections of these forms and you are advised to read the notes carefully to ensure that you understand the details. This guide is intended to provide an overview of the scheme, some practical hints and tips, and to help readers avoid some of the most common mistakes based on the experience of others. 

 

Overview of the Scheme

 

The DIY Housebuilders Scheme allows you to reclaim VAT from HMRC that you have paid out for your project if you are: 

 

  • building a new house
  • converting a building into a new dwelling
  • bringing an existing dwelling that has not been lived in for 10 years back in to use.

 

The scheme is intended to put a self builder in a similar VAT position to someone who has bought a new house from a developer and allows DIY housebuilders and converters to reclaim VAT for specific types of projects. The rules can be complex and it is important that every self builder understands them at the very start of their build because you should ensure that your project meets the eligibility criteria to avoid your claim being refused later. You must also ensure that your invoices are charged at the correct VAT rate throughout the build, and that they are in your own name. 

 

Only certain projects apply, and there are several conditions that must be met. 

 

For new builds the home must:

 

  • be separate and self-contained
  • be for you or your family to live or holiday in
  • not be for business purposes (you can use one room as a work from home office)

 

For conversions:

 

  • The building being converted must usually be a non-residential building. Residential buildings qualify if they haven’t been lived in for at least 10 years.
  • You may claim a refund for builders’ work on a conversion of non-residential building into a home.

 

You should qualify if you are building your home from scratch and meet the other criteria whether or not you have instructed a builder to do the majority of the work. Or you can buy a 'shell' from a builder and complete the internal work. You cannot buy a finished property from a builder and use this scheme to cover additional work such as building a conservatory or garage, or adding flooring. The purchase of a 'shell' must clearly state that. 

 

Even if you have instructed builders to complete the majority of the work (that should be zero rated if a new build) you can still use this scheme to claim for any materials you have purchased directly yourself. There can only be a single claim for a property however and this should be within 3 months of completion. There are very strict rules about this, discussed further down but send your claim in on time or you risk the entire refund being refused.  

 

You MUST check your planning permission to see if it notes any restrictions, for example whether the permission ties the new property to a business or prevents the new dwelling from being disposed of separately. Restrictions like this may make your entire claim ineligible so it is best to ascertain whether your project will qualify from the outset and then if appropriate apply to have any conditions removed from the planning permission if you can. Your home must also be considered lawful and this means that you must have built the dwelling stated in the planning permission. If your planning permission starts off as a renovation / extension but the building was later discovered to be unstable so it was demolished and built from scratch you must ensure that the PP is altered even if building control are aware and have approved building plans. The 2 departments are separate and will not liaise with each other in general. It is your responsibility to ensure that the planning permission is in line with the approved building plans. There have been cases of claims being refused in such circumstances (see here) even where retrospective planning permission was granted for a demolition and rebuild. 

 

It is estimated by HMRC that around a third of self builders do not apply for the VAT reclaim. That's a lot of money being gifted to the tax man and I'm hopeful that posts such as this will help people claim the money that is rightfully theirs. 

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Keep good records

 

It's very important that you keep good records during your project and ensure that all invoices are correct. It is worth setting aside some time on a regular basis to check the invoices (and ensure that the correct VAT rate is shown). If they are reclaimable invoices the easiest way is to enter them into a spreadsheet in the format that HMRC will accept, and file them. You can use the HMRC forms and hand write the details but a spreadsheet should be easier. Unless your project is mostly turnkey you are likely to have hundreds of invoices to claim for at the end of your project so keeping on top of the admin should avoid getting in a muddle later. HMRC will expect your invoices to be filed in the same order as listed on the schedule. They will also want to see a reference for each invoice but for simplicity this can be your own reference rather than the invoice number, so by far the easiest method is to start at number 1 as the reference for your first invoice and increment from there.There are also separate schedules for where VAT is shown separately or not so keep those invoices separate and use a different numbering sequence for the invoices not showing VAT separately, so starting at 1000 for example. Each invoice should be entered on a single line on the schedule. 

 

Currently the details required by HMRC are as follows:

 

Reference Number, Date of Invoice, Description, Supplier's Name, VAT Paid (where VAT is shown separately) or Total paid (where VAT is not shown separately). 

 

HMRC will accept your own printout as long as it is in the same format as detailed in the claim form. Where an invoice covers a number of different items you should note the main items as the description so 'plumbing supplies' for example. 

 

When checking the invoice you should ensure that is a proper invoice as opposed to an email confirmation, order reference, pro forma invoice or similar. You will need to ensure that the supplier's name and VAT number are noted on the invoice and that the invoice is in your name and preferably shows your address. The address does not have to be the address of the property being built. Sometimes it's a case of looking for the VAT number as it can be almost anywhere in my experience. You should check that the invoice is for a reclaimable item and that the right amount of VAT has been charged. HMRC will not refund VAT that has been incorrectly charged so it is very important that you understand the rules that relate to this that are discussed in more detail hereIf you buy an item online from a retail outlet sometimes you will only receive an order confirmation rather than a formal invoice for VAT purposes. In this case you may have to contact customer services to request a formal VAT receipt. Some of the sheds like Homebase have a desk you can go to to request a VAT receipt. Likewise if you purchase an item in shop you may just receive a till receipt that whilst it shows the VAT number may not show your name / address. See if the company will provide you with a VAT receipt. There is evidence to suggest that till receipts are acceptable but this may not be consistent as it does seem to vary and may be down to who processes the claim at HMRC. You may only get away with till receipts for low costs items. There does seem to be some inconsistency in what HMRC will accept as an invoice. Some people have had documents noted as 'orders' accepted for example and others haven't. If at all possible try to ensure that your invoice shows the word 'invoice' on the document (not pro forma) as this should ensure that your invoices are more likely to be acceptable.

 

If an invoice contains a mix of eligible and non eligible items you can still claim for the eligible items. Mark the items that you are claiming for in some way or cross through those that you are not claiming for, and ensure that you use the same method consistently. 

 

If you have used an item that doesn't sound like it should be eligible to claim for annotate the invoice in some way to demonstrate why it was used in your build. For example my claim included a 'garage drainage pack' but I wasn't claiming for a garage and it was used for the house / patio drainage. And call it something more relevant when entering the details onto the spreadsheet.  

 

Invoices may come in many shapes and sizes from A4 sheets to long till receipts. It is good practice to file these in folders, stapling every invoice to a sheet of A4 paper and numbering them using an incremental system. A self build can take several years to complete and it's very important that you keep the invoices safe and ensure that they are kept out of sunlight so that the print does not fade. It is advisable to store the files containing the invoices carefully to ensure that they remain in the best condition possible. For my own claim I added 200 sheets of A4 paper to a large file and used every sheet to staple an invoice to. When I reached 200 I started a new file and did the same. I used a smaller file for the invoices where VAT was not shown separately as these were relatively small in number. I also used the A4 sheet to write relevant notes about the invoice as it can be difficult to remember anything unusual a few years down the line. You could also add a notes column to the spreadsheet but not to be printed for the claim. If an invoice looks like it may fade easily or the print is faint to begin with it may be prudent to take a photocopy of the invoice and file alongside the original. That said, I kept my folders in a dark cupboard and even after 8 years all invoices were still readable. 

 

HMRC can ask for evidence that you paid the invoice so it is wise to keep records of how the items were paid (cash, bank transfer, credit card etc.) by adding a separate column to the spreadsheet that you can select not to print when printing the spreadsheet to send to HMRC. It's also good practice to print bank statements and credit card statements that evidence the purchases and keep these in a file in the event that you are asked to provide evidence later, as requesting statements from years ago can incur a fee. If you have purchased any items from a business account HMRC may also wish to see evidence that you have refunded that money from your personal account. Unrelated to the claim itself but it's important so I will mention it here, it is wise to pay for items using a credit card where possible as this will protect you under Section 75 of the Consumer Credit Act. This will provide cover if your supplier goes into liquidation for example and covers purchases over £100. Even if you pay a small deposit on the credit card you should be covered for the whole purchase. 

 

Payment by gift card seems to be acceptable. This was my experience at least as I paid for a handful of items using gift cards (Ikea) and was successful in reclaiming the VAT on the items purchased. 

 

You can claim the VAT for delivery costs of eligible items as long as they are on the same invoice and there is not a separate invoice for delivery. For large delivery costs it is worth asking the supplier to ensure that they add the delivery charge to the main invoice so that you can reclaim the VAT. 

 

When purchasing items through a site like eBay it is worth checking whether the supplier (if VAT registered) is able to provide a VAT receipt with your name and address on it if reclaiming the VAT is important to you. If they can't then it may actually be cheaper to buy the item elsewhere. The invoices from eBay sellers and the like were in my experience the most random in terms of what was supplied. As noted above do check that the document sent is a proper invoice with supplier name and VAT number as well as your own name and address (not your eBay user ID!). 

 

For items purchased from overseas you can still reclaim the VAT but you must convert the amounts into sterling using the exchange rate applicable for that day. It is also necessary to provide evidence of the exchange rate on that day although the easiest way may be to attach a copy of the credit card statement or similar that shows the amount paid in sterling. If you do not wish to do that, attach evidence of the exchange rate for the day in question. Note that the VAT rate is dependent on the country of purchase. 

 

When you send your claim to HMRC you will need to send the original invoices. You may therefore wish to scan, photocopy or photograph the invoices in case they go astray. Given the large number of invoices this may seem like a daunting prospect unless you have done this from the start, so I decided to take a chance and only made copies of invoices over a certain value. In any event it is wise to use a recorded delivery service to send the claim to HMRC to provide assurance that that the claim has arrived. You are not allowed to hand deliver claims and they must be sent via the post or through a courier. I used a 'next day before noon' service when I sent mine. I did look to insure the parcel but the insured amount was capped at £2500 and it was going to cost over £100 just to cover it for that amount. That was less than 10% of the claim value so I didn't bother with insurance but sent it the quickest way I could. 

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What VAT rates should be charged

 

The notes here mostly relate to new builds as the majority of projects fall into this category. The rules are a bit different for a conversion and you should check these using VAT Notice 708. The important thing to note is that HMRC will not provide a refund where VAT has been wrongly charged. It is your responsibility to check all invoices and ensure that you have been charged at the correct rate. If you send them in as part of your reclaim they will be rejected and you will be advised to go back to the supplier to ask for a new invoice to be raised. That will be more difficult to achieve once you have paid the bill including VAT, and you run the risk that the company has dissolved or de-registered for VAT in the interim so you will be out of pocket. If you are in any doubt then seek advice either unofficially via this forum or officially by calling the HMRC helpline. There are instances where HMRC have decided to charge a financial penalty where someone has tried to claim for work not covered under the scheme. I would hope that they wouldn't take this action for a few invoices that were potentially incorrect but trying to ensure that the claim is as accurate as possible is key. 

 

The high level rules are as follows:

 

  • You can only reclaim VAT on building materials bought by yourself on a supply only basis
  • You cannot claim for any labour costs for a new build. Where your builder is VAT registered they should zero rate all labour charges on a new build or charge reduced VAT for the main structural work for a conversion.
  • If your arrangement is for supply and fit then both the labour costs and the materials costs must be zero rated for a new build (assuming the materials are eligible items). Your claim for those invoices will be rejected for any items that are for supply and fit where VAT has been charged incorrectly.  
  • Most hire charges, architects fees, separate design fees etc must be standard rated and are not eligible to be reclaimed. 

 

As usual however the devil is in the detail ... 

 

Let's take hire charges.

 

  • If you arrange to have scaffolding erected then the erection and dismantling fees should be zero rated. The hire charge however is subject to standard rate VAT which is not reclaimable. There was a test case where the hire charge was noted as free of charge as long as the erection and dismantling fees were paid and it was judged to be inappropriate so it is unlikely that your scaffolder will agree to zero rate all of the costs. There is some evidence to suggest that the rates could generally be around a third labour costs and 2 thirds hire charges. Regardless, no 'hire only' charges can be refunded via the reclaim process so it is your responsibility to ensure that you are charged at the correct rate. 
  • If you instruct a VAT registered builder to do a job as 'supply and fit' then any equipment they bring on site to use should be wrapped up in their bill and zero rated as it is judged to be incidental to the work being done. If you hire the equipment yourself to be used by your builder then you will have to pay VAT at the standard rate that is not reclaimable. The exception is when the equipment arrives with an operator who is involved in building your home. So for example a crane with a driver who is engaged to help erect the timber frame. In that example you can ask the company to zero rate the invoice. 
  • If your builder is VAT registered it is worth asking him to supply all equipment needed, even if they need to hire the equipment, and to zero rate the whole arrangement to avoid having to pay the VAT. 
  • If you order in skips yourself (or arrange muckaway services) these must be standard rated, however if you arrange these through a builder for a package of building work (digging foundations for example) and these are supplied by the builder they can be zero rated. 

 

Another scenario where you may be able to get costs zero rated that are not ordinarily able to be zero rated when arranged separately is in the supply of a timber frame kit. Whilst architectural or structural engineering services must be standard rated if you provision those services directly, when they are part of a contract to supply the timber frame and those services are part of the work that must be covered then the whole arrangement should be zero rated as those elements are incidental to the main contract. Similarly if you contract a supplier to design your whole house heating / energy system for example then you will pay VAT at the standard rate but if you contract them to supply and fit and the design is part of the same arrangement then the whole amount should be zero rated. 


Other work 'closely connected to the construction of the building' can be zero rated. This includes:

 

  • Demolition works if being replaced by a new dwelling. This should also include removal of asbestos by a specialist company. 
  • Provision of services (water, power etc)
  • Site clearance work.
  • Moving or rerouting existing services, eg electricity poles or water mains. 
  • Provision of a new access to the site for deliveries etc

 

It is best to have the conversations about the VAT rate to be charged at the outset. Some builders are very reluctant to charge anything but the standard rate of VAT in case they zero rate something incorrectly that HMRC decides that they need to pay the VAT for later. Whilst VAT registered builders must by law charge the correct VAT rate for the job there are many experiences on here where builders have not wanted to do this, or have zero rated the labour but not the materials supplied. The best way to approach it if they don't understand the rules and want to charge you VAT is to provide them with something official that explains the process so you could quote VAT Notice 708 and give them a copy of the planning permission for example. When @lizzie contacted HMRC about the issue she was told to use the following form to give to the builder so this may be useful in the case of a reluctant supplier as it provides them with something 'official' that they can use to evidence the zero rating provided. 

 

proforma vat cert.pdf

 

If despite all of that they still won't agree to zero rate where applicable you will need to decide whether your still want to use them and lose the VAT or instruct a different builder. 

 

Something else to consider when using a supply and fit arrangement vs labour only is the amount of VAT that you will have paid out and have to wait to reclaim once the house is complete. There can only be one reclaim and it has to be once the house is complete so you will need some additional money available to pay all reclaimable VAT costs up front. So in the timber frame example if you buy the timber frame from the supplier and use their own fitting service the whole amount should be zero rated as supply and fit. If however you get a slightly cheaper quote for the labour costs from elsewhere you will need to pay the VAT on the timber frame kit which can be a considerable amount and then wait to reclaim it at the end of the project. You will need to decide whether making a labour saving earlier on in the build is worth it because if you are on a tight budget and the project starts to go over budget you may not have enough cash to complete with so much money tied up in the VAT reclaim and borrowing on credit cards etc. is expensive and may cost more than the labour saving you made earlier on in the project. In addition, whilst if you follow the HMRC guidelines to the letter and send your claim in on time you should be successful in having the VAT refunded. It is however still a risk, albeit potentially low, until you have the money in your bank account. So it can be better to get as much as you can zero rated if possible, although clearly that is not possible if you intend doing all or some of the work yourself.  

 

If you use a non VAT registered builder then you must ensure that you order all materials and that the invoices are in your name. You cannot claim for invoices raised in someone else's name. If you want your non VAT registered builder to be able to order supplies the best way is to set up an account with a builders' merchant in your own name and have them order through your account. You may need to repeat this information to your builder more than once as many non vat registered builders won't understand the importance of an invoice being in the client's name. There were 2 occasions in my own build where I was handed invoices to settle with the builder's name on them despite telling them on numerous occasions that I must make the order. Luckily they weren't for too much money but builder's can be keen to supply all materials so that they can add their bit of profit on top in my experience and you will lose the ability to reclaim the VAT on those materials if the builder is not VAT registered and this cannot zero rate the job. 

 

The full list of regulations that VAT registered builders have to follow are contained in VAT Notice 708. This is an extremely long document and it would be impossible to cover all elements in this summary so best to search through the document if you are in any doubt as to what your builder should charge you in terms of VAT.

 

Supply and fit arrangements with VAT registered builders can be beneficial if they are willing to zero rate the jobs both because it means you do not have to pay the VAT on materials upfront and reclaim the VAT, plus it removes the element of uncertainty as to whether elements of your claim will be accepted by HMRC for a refund. 

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What if you have been charged VAT incorrectly

 

If you have been charged VAT when you shouldn't have, eg for supply and fit arrangements that should have been zero rated, (see post above), you can ask for a new invoice to be raised and the VAT refunded. This may also happen when you weren't aware that the service could be zero rated in full or in part, eg removal of asbestos from a building to be demolished (in full) or scaffolding (in part). Ask for a view here if you are not sure whether this is the case as the rules can be complex, or call HMRC. The time limit for this appears to be 4 years. That is based on the fact that VAT Notice 700/45 seems to allow for corrections to be made for up to 4 years. 

 

@HerbJ, has produced this helpful overview of how he went about recovering VAT in this scenario. His was after he had sent his VAT reclaim and the invoice in question was included in his claim. Note how HMRC responded stating that the 'supplier must correct the error'. You can adapt the wording below if it's before you apply for the reclaim (or didn't sent the invoice in question as part of the reclaim). 

 

For convenience the letter @HerbJ received from HMRC is here:

 

HMRC Letter for BH.pdf

 

This is the form of email we used to recover VAT incorrectly charged,  months after the invoice had been paid. 

 

SECOM supplied and installed an Intruder Alarm system (Specification CP111392) for us in 2016 as part of building a new house.

I am in the process of reclaiming the VAT back (under the DIY scheme -VAT431) for the installation element but HMRC has rejected your paperwork because ...

‘This invoice is invalid as the goods/services have been supplied and fitted or services have been provided in the course of construction of a new qualifying dwelling and no VAT should have been charged. Your supplier must correct the error. If the supplier still has any queries regarding the liability of their services or want to know what to do to make the necessary adjustment, they should contact the National Advice Service. Ref: VAT431 NB Notes, Section 2 – VAT wrongly charged’

Please can I request that you review this invoice and amend the first item on the invoice (IO01) for £1308.00 to be zero rated – and refund the VAT that I’ve been charged on this item (£261.00).

To support this change I supply
- The Certificate for zero-rated
- The Completion certificate

If needed, I can supply the full letter from HMRC.

 

 

The certificate for zero-rated can be created from this pro forma. 

 

proforma vat cert.pdf

 

You could include a copy of the planning permission if you do not yet have a completion certificate. 

 

 

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The reclaim process

 

One of the most important things is to send the claim in on time. I can't stress this enough so it is highlighted in bold and covered in more detail below. There have been many claims rejected because they were submitted too late. 

 

The full HMRC VAT reclaim process can be viewed here.

 

If you are claiming for a new build the reclaim should be on Form 431NB. If you are claiming for a conversion then use Form 431C. There is a lot of information contained on the forms along with detailed notes about eligibility and what can be included in your claim. It's well worth reading through the form at the very start of your project so that you can check eligibility and also what you can claim for and what you can't. Some further details of the types of materials you can claim for are included here

 

The first section of the form (A) is for your personal details so should be easy to complete. This section also asks for the date that you occupied the building. It is unknown how HMRC use this information however it is not unusual for self builders to begin to live in their property before it is completed. And similarly it is not unsual for the local authority to start charging council tax when they deem the property to be habitable that can be well before the work has been signed off by the building inspector and the completion certificate issued. If any further information comes to light that signifies the relevance of the occupation date it will be updated here. 

 

The second section (B) assesses your eligibility to claim and section C is for details of the property that is being claimed for. Then you start the section relating to the reclaim where you will need to enter all invoices that you are claiming for; invoices with VAT shown separately in section D and invoices where the VAT is not shown separately in section E (plus section F for a conversion). You are able to supply your own spreadsheet as a printout as long as it is in the same format as in the HMRC form. @JSHarris helpfully has an example of such a spreadsheet on his blog site here.

 

Details about how to do that as well as what must be shown on the invoice are included in the keep good records information above. As well as the claim form you will need to send in a copy of the planning permission, the completion certificate (or other allowable evidence of completion  - these are listed in the notes), a full set of building plans and the invoices filed in the same order as listed on the schedule. This doesn't have to be strictly in date order but if you are logging regularly it should be relatively easy to keep them more or less in date order. 

 

There is no need to send any original documents in with your claim, photocopies will suffice. For the building plans you can also send a printout and it doesn't need to be full size plans. For my own claim I sent an A3 copy but I imagine that an A4 copy may be acceptable as long as it is readable. 

 

Expect HMRC to check that the quantities are reasonable. So if you have 10 windows in your property and have claimed for 20 for example it will be cause for concern and might result in an investigation. Stay under the radar and ensure that the quantities claimed are appropriate for your build.  

 

If your invoice is highly summarised, for example 'supply of windows' you may wish to include the window schedule alongside the invoice for example. There is evidence to suggest that HMRC may initially refuse such invoices (again dependent on who processes the claim) and ask for further evidence. Whilst you should hopefully receive the refund eventually it will cause a delay if they ask for more details.  

 

A really important point to note is that the planning permission and building plans must correspond to the property you are claiming for. If there are any anomalies you risk the claim being rejected or queried at the very least that will delay your refund. So for example if you claim for a garage that is not on the planning permission. Or you claim for a new build when the planning permission states that it was to be a renovation. If anything changes in the course of your project that means that you build something slightly different to what's contained in the planning permission you MUST get the planning permission altered to correspond to what you have built. There have been 2 fairly recent tribunal cases where the original property was demolished because the structure was found to be unstable when the renovations started and the building inspector agreed that it was safer for the house to be demolished and built from scratch. In these 2 cases the planning permission was for a renovations but was not amended until after HMRC rejected the refund claims. Retrospective planning permission was sought and successful in both cases but the tribunal ruled that this was not enough to deem the development lawful at the time of construction and the claims failed. See more on these cases hereYour building inspector will NOT liaise with the planning department and it your responsibility to ensure that all documents accurately reflect the work you are carrying out otherwise the work may not be considered lawful and you risk the claim being refused. Similarly your approved building plans must correspond to the work you have carried out. 

 

Your planning permission must not prevent the separate disposal or separate use of the dwelling you are claiming for. So for example if there is a condition in the planning permission that states that the dwelling can only be used by a person employed by a specific business, or where an annex has been built that cannot be sold separately from the main house. In order for a VAT claim to succeed these restrictions must be lifted before the claim is sent in and potentially before completion certificate is provided. Retrospective amendments are not allowable as can be seen in the tribunal cases below. 

 

The timing of sending in your claim is very important too. The form states that a building is normally considered to be complete when it has been finished according to its original plans. You can only make a single claim not more than 3 months after the construction work is complete and the 3 months generally runs from the date of the document being used as completion evidence. It appears that HMRC are becoming stricter in this area and you are strongly advised to send your claim in within the 3 month window. Take advice from HMRC BEFORE you reach the 3 month deadline if there is any reason that you will miss this deadline. You risk having the whole claim rejected if you do not send it in on time andthe advice from this site must be to ensure that HMRC receive your claim within the 3 month window. You may be able to persuade HMRC that the reason for the delay is acceptable but it is advisable to stay away from any exception processes as far as you can. There is also evidence to suggest that HMRC are using tools such as Google Maps to ascertain whether you have delayed obtaining the completion certificate, and there is one case where a claim has been refused for late submission here. The full facts of that particular case are unknown however but I note it here to highlight the type of information HMRC will use to assess a claim. There are other documents that you can use to send as completion evidence, for example a temporary habitation certificate in Scotland, or a VOA notice of making a new entry in the valuation list in England and Waled. These are all detailed within the claim form notes but the most usual one is the completion certificate. If you make your refund claim early, for example at the temporary habitation stage, note that you cannot make a further claim once all work completes. Only a single claim is allowable under the rules. 

 

There is evidence to suggest that you can still claim for materials purchased after the completion certificate has been issued until you send the claim to HMRC within 3 months. If despite this there is some finishing off work that you still need to have done that won't be finished before you need to send the claim in it you may consider ordering the materials to be used later. Examples may be things like hard landscaping materials. Or alternatively a VAT registered builder may do the remaining work for you on a supply and fit basis and zero rate the work.  

 

Once you are ready to send the claim package it up and send to HMRC with the invoices. Sending everything neatly placed in folders is advisable. Currently the address to send the claim is here but there is also a recorded message containing the address if you call HMRC. The claim will need to be posted or sent by courier as hand delivered claims are not accepted. On the claim form it notes that you will receive an acknowledgement within 5 working days of HMRC receiving the claim, and that you can expect you claim to be dealt with within 6 weeks unless further information is requested. You can disregard these timescales. There is evidence to suggest that claims are taking much longer than this. My own claim that was sent in February 2018 took over 5 months until the refund was received in my account.

 

An example letter of where HMRC required more information to assess eligibility for the claim is below. 

 

EE738BA2-5027-4CCF-BD27-4ECD0DB2F493.thumb.jpeg.717f142b9313ab73d0220d56e3d95bb9.jpeg     

 

And an example of the letter sent where a claim has been successful in full. All paperwork and invoices are returned at this point.

 

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Other people have received a letter allowing a partial claim such as the one here: 

 

HMRC Letter for BH.pdf

 

Read the rejection details in this letter carefully as it could help you avoid similar issues, but as stated before some of this does appear to be dependent on who processes the claim. Invoices rejected can often be reissued by the supplier with the correct details shown that will allow them to be accepted by HMRC but it is much easier to deal any changes required at the time that the invoice was raised than to try to do this at the time of the claim when you risk the supplier having stopped trading or being uncooperative. 

 

If you are unhappy with HMRC's decision to refuse all or some of your claim you can seek a review of your case by an HMRC officer not involved in the case, or you can appeal to an independent tribunal but hopefully with some attention to detail most of the invoices will be accepted. It is much easier to comply with what is required by HMRC than risk your claim by not complying and having to state your case later. HMRC are very much in the position of power where this process is concerned and of the cases in the last 2 years that have reached the tribunal all have been dismissed apart from a single case that was allowed in part. 

 

If after reading all of this information you find that this is too daunting for you there are specialist companies who will submit your claim for you, but with some time spent to understand the rules, and some regular admin work set aside to check and log the invoices most self builders are able to apply for the refund themselves. 

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What items can VAT be reclaimed on 

 

A list of items that can ordinarily be claimed for and those that can't is contained within the notes section of the claim form. The detail shown below is not intended to be an inclusive list but is noted here to provide some general categories and highlight specific items that forum members have been successful in claiming for, or not. In some cases you may find that a builder is willing to zero rate certain supply and fit arrangements that include materials that you may not otherwise be able to claim for via this scheme, for example an automated garage door that does not function without the automation. There should also be nothing preventing you from securing any of the eligible items below on a zero rated supply and fit basis. 

 

What items are eligible? A summary is below (not an exhaustive list - if you feel that there are some items that it would be useful to include then please note them in a post below). Also read the notes section in the claim form as this also contains a list. This is not advice but a list intended to include items that are most likely to be allowed. 

 

  • All construction materials normally incorporated in a new dwelling, for example, bricks, blocks, timber, timber frame kit, concrete, insulation, sand, cement, plaster, plasterboard, roofing, stairs, windows, doors, guttering, doors, etc.
  • Electrical and plumbing materials
  • Fitted kitchen furniture such as kitchen units, sinks and worktops   
  • Boiling water taps (there is evidence to show that these are being approved)
  • Extractor fans, air conditioning systems, dust extractors and built-in vacuum cleaners
  • MVHR systems
  • Gas or electrical systems designed to heat space or water (includes Agas and solid-fuel cookers if designed to provide heating)

  • Gas or electrical systems designed to provide ventilation, cooling, purification or dust extraction incliding cooker hoods

  • Burglar alarms, fire alarms and smoke detectors
  • Heating systems including radiators, underfloor heating, storage tanks, solar-powered heating, boilers, air source heat pumps etc. 
  • Solar panels
  • Aerials and satellite dishes
  • Fireplaces and surrounds
  • Curtain poles and rails

  • Basic fitted wardrobes that meet all 4 criteria from VAT Notice 708 as noted in more detail at the end of this post

  • Plumbing and electrical installations including central heating, fixed heaters, fires and fireplaces, solar panels, bathrooms and showers

  • Integral blinds (sealed inside window units). At least one member has also been successful in claiming for external blinds that were fitted onto the window frames by the window supplier. 

  • Sanitary wear including showers

  • Bathroom accessories (towel rails, soap dishes etc)

  • Mirrors

  • Fixed floor coverings such as engineered wood, lino and ceramic tiles

  • Materials for installing services such as water, gas and electricity
  • Lifts and hoists

  • Light fittings (including chandeliers and outside lights)

  • Swimming pools and saunas inside or linked to the new dwelling

  • Permanent boundary fencing

  • Walls

  • Gates (but not any electrical components)

  • Garage doors. You may also have success in claiming for a motorised garage door if it comes as a holistic unit and is noted as a door. You cannot claim for separate automation. 

  • Drives, roads, patios, footpaths, parking areas

  • Turf - as noted in VAT Notice 708 - the provision of soft landscaping within the site of a building (such as the application of top-soil, seeding with grass or laying turf)

  • Plants and trees but only as detailed on an approved planning permission

  • Delivery charges included on invoices for materials

 

As yet unproven but potential to be eligible:

  • Hobs with integrated ventilation (eg Bora) - no evidence to show that these are allowed yet but given that an Aga that provides cooking and heating is allowable an integrated hob may be too. If you have any information as to whether these are being accepted please post below.  

 

What items are ineligible? These include:

 

  • Rooms above or attached to a detached garage
  • Detached workshops or storerooms
  • Sheds
  • Stables
  • Detached swimming pools
  • Garages and conservatories not included in the planning permission 
  • Plants and trees not included in the planning permission
  • Domestic electric and gas appliances, such as ovens, fridges, microwaves, coffee makers and dishwashers etc, whether built-in or freestanding
  • Lampshades and ornamental light fittings
  • Electrical components for garage doors (or door locks) and gates
  • Curtains and blinds
  • Carpets, underlay and carpet tiles
  • Audio equipment, built-in speakers, intelligent lighting systems, CCTV, TV receivers etc
  • Consumables (sandpaper, white spirit etc)
  • Tools
  • Bedroom furniture, bathroom furniture (ie vanity units), mirrors
  • Garden furniture, ornaments and sheds
  • Hire charges 
  • Separate architects fees, design charges, survey fees, solicitors' fees, project managers engaged directly by you, structural engineers' fees etc.  
  • Labour charges (unless for a conversion)
  • Skip hire, temporary fencing
  • Muckaway
  • Delivery charges on separate invoices even if for eligible items

 

 

Criteria for eligible Wardrobes from VAT Notice 708 is below:

 

Basic wardrobes installed on their own with all the following characteristics:

 

  • the wardrobe encloses a space bordered by the walls, ceiling and floor. But units whose design includes, for example, an element to bridge over a bed or create a dressing table are furniture and are not building materials
  • the side and back use three walls of the room (such as across the end of a wall), or two walls and a stub wall. But wardrobes installed in the corner of a room where one side is a closing end panel are furniture and are not building materials
  • on opening the wardrobe you should see the walls of the building. These would normally be either bare plaster or painted plaster. Wardrobes that contain internal panelling, typically as part of a modular or carcass system, are furniture and are not building materials
  • The wardrobe should feature no more than a single shelf running the full length of the wardrobe, a rail for hanging clothes and a closing door or doors. Wardrobes with internal divisions, drawers, shoe racks or other features are furniture and are not building materials.
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VAT Tribunal cases

 

As part of the appeals process for refused claims, or parts of claims, there is the ability to appeal to an independent tribunal. All of the cases that have been heard by the tribunal since April 2003 can be read online here. In order to search for them select category VAT- Builders, followed by sub category Do - It - Yourself. There isn't an easy way of pulling together a summary from the site, and mostly each decision needs to be read in detail in order to establish the full facts of the case. For this reason I have attempted to summarise the cases heard by the tribunal since the start of 2016 and these are noted below. Many of them have specific themes that relate to cases having the wrong planning permission, so for a renovation rather than a new build, or restrictions that tie the dwellings into business use. There are some interesting facts however and I have marked in bold the elements that may be more significant to people building now. 

 

The cases take some time to be heard at the tribunal as can be seen from the dates of the initial claim so there may be others in the pipeline that evidence HMRC adopting a different stance in terms of how they are currently assessing claims, but that is difficult to judge given the dates of the cases below. Any new cases will be added here for completeness as they become available. 

 

Note that in the cases below all were dismissed apart from one that was allowed in part. 

 

Decision Date

Case
Number

Claim Date

Result

 

 

29/03/2018

TC 06418

May-16

Dismissed 

 

PP was to demolish garage and construct building to be used for social and domestic use, but not as separate accommodation. Appeal related to the fact that the building constructed could be used as separate residential accommodation. Decision - PP prevents this

 

02/08/2017

TC 06040

Sep-13

Dismissed 

 

 

PP was for a dwelling and garage for a 'site manager' on land next to a commercial garage with the condition 'The occupation of the dwelling shall be limited to a person solely or mainly working at the property'. Decision - PP prevents separate use of the dwelling

 

07/03/2017

TC 05704

Mar-16

Allowed in Part

 

 

Appeal against items refused. 
Description - whether certain works lawful (1), materials incorporated into the site eligible (2), whether VAT charged at incorrect rate can be refunded (3) & (4) - appeal allowed in part. 
1. Electric cables were added to a car port - initially HMRC said it was not part of the eligible building, HMRC conceded this point before the hearing
2. Pro forma invoice and landscaping materials (cobbles in wire cages to form a boundary). The invoice said 'pro forma' and HMRC stated that the work was not part of a LA approved landcaping scheme. Whilst this was not specificed in the PP the appellant said that he had discussed the inclusion of these items to form a boundary with planning officers who had come to the site post completion  and were happy that the work met the planning condition. Claim allowed as part of an approved landscaping scheme
3. Wrong vat rate charged @ 20% so only 5% refunded, request to supplier to refund the other 15% but supplier had deregistered for vat - dismissed
4. Wrong vat rate charged @ 20% so only 5% refunded, request to supplier to refund the other 15% but supplier had gone into liquidation - dismissed
Tribunal noted "We do not consider that HMRC should be expected to go further and advise potential claimants that they may be unable to recover overcharged VAT if their supplier de-registers or becomes insolvent. "

 

24/02/2017

TC 05687

Sep-15

Dismissed 

 

Construction of new build house – whether designed as a dwelling. Original PP was for an extension to the existing property.  Shortcomings in the remaining structure that were subsequently found meant that it was inadvisable to build an extension onto it. As a result the property was demolished to ground level and a new building constructed. Retrospective PP was applied for and the contractor charged VAT @ 20% until PP was resolved. Retrospective PP granted 5 months later but the decision was that retrospective PP was not acceptable. 

 

01/02/2017

TC 05626

Aug-12

Dismissed 

 

 

Whether the separate disposal of the dwelling was prohibited by the terms of a covenant under section 106 Town & Country Planning Act 1990 – terms of covenant were considered. They prohibit a separate disposal of the dwelling – appeal dismissed

 

24/01/2017

TC 05621

Mar-12

Dismissed 

 

Whether condition in planning permission prohibited ‘separate use’ of dwelling.

PP stated  “The occupation of the dwelling shall be limited to a person solely employed by the livery business located within the lands outlined in blue on the approved plan attached, and any resident dependents.”
A new planning application removed the condition but after both the house was built and the reclaim was submitted. 
The case focused on whether the subsequent removal of the PP condition was a material consideration. Decision - appeal dismissed

 

06/01/2017

TC 05591

Mar-12

Dismissed 

 

Conversion of a barn into residential accommodation and a workshop / 'Live-Work Unit' - Whether 'designed as a dwelling?' - Schedule 8 Group 5 Note (2) VAT Act 1994
PP stated "The dwelling hereby approved shall only be occupied by a person or persons who owns or is employed in the operation of the adjoining workshop business, or a resident dependent of such a person. The dwelling hereby approved shall not be occupied until such time as the adjoining workshop use has been brought into use, and thereafter the workshop/storage areas shall not be incorporated into the living accommodation of the dwelling and shall remain available for the stated use."
Decision - tied to business use - dismissed

 

02/12/2016

TC 05519

Oct-14

Dismissed 

 

Whether prohibition on separate use or disposal. There were multiple conditions in planning permission including "The occupation of the dwelling hereby permitted shall be limited to persons solely or mainly employed in the equestrian enterprise at the site … or a widow or widower of such a person and any resident dependents or for purposes ancillary to the residential use of Avil’s Farmhouse". Appeal dismissed.

 

31/10/2016

TC 05462

May-12

Dismissed 

 

Bungalow built by owner of fishery business for own occupation – whether designed as a dwelling for purposes of subsection 35(1A)(a) and Note (2)(c) to Group 5 of Schedule 8 to VAT Act 1994 – whether conditions of development contained in planning consent prohibited “separate use” of dwelling for purposes of Note (2)(c) . 
PP stated “The occupation of the dwelling shall be limited to a person solely or mainly employed or last employed in Park Hall Lake Fisheries or a
10 widow or widower of such person or any resident dependants.”. Appeal dismissed

 

20/09/2016

TC 05380

Jul-15

Dismissed 

 

Work had started using PP granted many years prior to appellant’s works

3 barns in Devon were granted PP in 1994 for change of use to rural workshops followed by a subsequent PP change to allow one of the barns to become a dwelling alongside the workshops. Nothing had been completed or signed off, and nor did the work comply with building regs. A certificate of lawful use was issued in 2007. The property changed hands twice and the appellant engaged an architect to rectify the issues and work was completed and the completion certificate issued. Decision related to the point that the barn had been occupied as a dwelling for many years. Not a safe or compliant dwelling but a dwelling nonetheless and therefore the appeal failed.  

 

09/09/2016

TC 05368

May-15

Dismissed 

 

When is new build finished – not necessarily when completion certificate is issued.

a letter dated 03 November 2015 from HMRC to the appellant in which HMRC stated that a refund of VAT in respect of eligible building materials could not be made if those materials were purchased after the building “is deemed complete”. HMRC went on to say that the building was deemed complete when a Completion Certificate from Building Control was issued. HMRC's representative did not seek to rely upon or support that contention. Tribunal decision noted "In our judgement she was correct not to do so because it is plainly wrong." 
The tribunal noted that of a dwelling house satisfies the various criteria set out in the Building Regulations that does not necessarily mean that the building works, for which planning permission has been granted in respect of a new dwelling, will have been completed.
A Completion Certificate can be granted where the dwelling itself satisfies each of the applicable Building Regulations so as to qualify as being habitable, notwithstanding that, for example, the driveway, surrounding paths and/or boundary fences/walls have not been completed. Some may choose to reside in a new house whilst those outstanding works are done. The fact that they have not been done will not prevent a Completion Certificate being issued. Such a Certificate does not certify that the entire building works have been completed; only that the dwelling has been constructed so as to be habitable in accordance with the requirements of the Building Regulations. It will always be a matter of fact and degree as to whether and when any particular building project has been finished and come to its actual completion. It will not necessarily be the date upon the Completion Certificate.

At the hearing HMRC did not contest the above that but focused on the type of work that was to provide cupboard space in 2 bedrooms. HMRC contested that such cupboards were fitted furniture and not eligible. The tribunal hearing agreed that one cupboard was fitted furniture but the other was not and ordinarily would be eligible for refund of VAT however the cupboards had been fitted on a supply and fit basis and therefore the appeal failed. Appellant was advised to seek a refund of the VAT for the cupboard in the eligible bedroom from the supplier

 

15/08/2016

TC 05323

Jul-15

Dismissed 

 

Planning permission granted for alterations and extension but property demolished and rebuilt – Completion Certificate issued May 2015
Retrospective planning permission granted for demolition and rebuilding Nov 2015 
The original intention was to extend the property at the rear and construct a first floor above the existing structure. An exploratory investigation to the front elevation found that the existing structure had been constructed on an old stone wall without an adequate foundation.
The building inspector examined the foundations and agreed that the existing situation was unsatisfactory. Further investigation at the rear of the property found a worse situation as the foundation of the building was virtually non existent.Considering the minimal amount of the existing structure that would have been retained the existing building was to be demolished and rebuilt strictly in accordance with the approved plans and building regulations consent was granted however the PP was not revised.  
However retrospective PP not sought until after the VAT refund was refused therefore the dwelling was judged to be not lawful at the time that it was carried out. 

 

01/06/2016

TC 05128

Apr-15

Dismissed 

 

Planning conditions  in place at time of application
PP was for log cabins for holiday accommodation and case centred around whether the log cabin was tied to a business. Appeal failed due to condition imposed at the time.  

 

23/03/2016

TC 04980

Jan-15

Dismissed 

 

Demolition of building leaving a gable wall prior to rebuilding – whether construction of a new building or reconstruction and enlargement or extension of existing building and whether the gable wall was a façade
PP was for rebuild and involved retaining 3 external walls and 1 part of the gable end. When part of the gable end was removed the adjoining external walls were damaged / collapsed. A decision was made to retain the other gable end that was sound and rebuild the other walls in the same style. The council indicated that new PP was not required. The retained gable wall did not face the street and nor was it architecturally significant so not considered to be a facade, thus the decision was that this counted as an existing building not a new dwelling.

 

15/03/2016

TC 04973

Aug-13

Dismissed 

 

Refund claim rejected by HMRC on grounds that valid planning permission not in place at time works carried out – retrospective planning permission obtained 11 months after work completed
Original PP was for an extension of a bungalow but discussions with building control resulted in the decision to progress with a replacement dwelling due to the stability of the building. Building regulations and plans were agreed for replacement chalet
dwelling and new double garage but new PP was not sought

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As mentioned earlier I have pulled together this guide to help with the VAT reclaim process. It is a big subject and it is not possible to cover the entire contents of the claim process and VAT notice 708 here so I have focused on trying to help with understanding the key points and provide some hints and tips to make life a bit easier. I will not have covered everything so am looking for feedback on what else needs to be covered. If there is anything missing, unclear or incorrect please do provide feedback. 

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@newhome huge amount of work gone in here. Well done!  Hoping to get some news on my claim (currently being processed) in the next month or so.  Will let you know how I get on.

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On 27/08/2018 at 14:35, newhome said:

The best way to approach it if they don't understand the rules and want to charge you VAT is to provide them with something official that explains the process. When @lizzie contacted HMRC about the issue she was told to use the following form to give to the builder so this may be useful in the case of a reluctant supplier.

 

2 companies asked me for copies of the approved plans in order to have evidence that the job was correctly zero rated

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I provided  most with a copy of the planning permission and that sufficed it was only one or two that were difficult about it (most notably the render company) and thats when I rang HMRC for advice  and was told about the form to use if a supplier required further comfort on the zero rating.

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Great job to get this out. 

 

I've been busy today and haven't managed to go through, but I will get to it during the week and let you have any feedback, if appropriate.

 

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Indeed, I’ve already tweaked it twice this morning whilst on the train, and as you note it’s not an official guide, it’s aim is to assist, not be definitive. Only HMRC can be definitive as it’s their process. 

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Fantastic, @newhome.  I've just saved £200 as a direct result of this.  The invoice for the first part of my scaffolding arrived last Thursday, £2k + VAT on all of it.  I sent it back and asked for it to be zero rated on the labour part of it and it arrived back today - split right down the middle, £1k each for labour and hire, with the labour zero rated.  £200 less for the sake of reading and thread and sending an email.  Splendid!

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Fantastic! Party at @vivienz‘s then 😀 🎉 🎉 

 

 

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Added to say that if anyone reads this and believes that they have been overcharged by a supplier, even if their build is finished you can still go back and ask for an invoice to be corrected and monies refunded. There is a time limit I believe. 

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An extremely useful guide. - thanks for all your hard work.

Our claim went in a week ago. No official acknowledgement yet - just a signed for note from Royal Mail.

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26 minutes ago, RandAbuild said:

No official acknowledgement yet - just a signed for note from Royal Mail.

 

Don’t hold your breath lol. Mine took over 5 months end to end! And about a month before the first communication. 

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That's useful to know, thanks. I'll keep you posted on how we get on

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@newhome super helpful, thank you.

 

Just to add, if Planning Permission has been granted for a zero rate building then services such as site investigation can be zero rated. I had a ground investigation conducted and was charged normal VAT. After quoting the relevant section from 708 (3.3.6), the invoice was altered and VAT returned.

 

After discussion with the surveyor, the confusion seems to have resulted from an update to VAT708, where previously this sort of site investigation was not eligible to be zero rated.

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