Establish the building's eligibility and the treatment of each supply before agreeing the budget. [1] [2]
Zero rating depends on the actual work
HMRC's construction guidance sets conditions for zero rating qualifying new-dwelling construction. The planning description “new build” is not sufficient on its own: the building, work and supplies must satisfy the tax rules. Altering or extending an existing home should not be priced as zero-rated new construction merely because the result will look substantially different. [1]
Demolition-and-rebuild projects need particular care over retained elements. HMRC generally requires construction from the ground up, while allowing specified retained below-ground features and particular façade-retention circumstances. Confirm the proposed scope before assuming that partial retention preserves new-build VAT treatment. [1]
Separate professional services are different
Architectural, surveying, consultancy and supervisory services supplied separately are normally standard-rated. HMRC also describes circumstances in which design costs form part of a contractor's single qualifying design-and-build supply. The contract and actual supply matter; it is not enough to label an invoice “design and build”. [1]
Ask for the VAT assumptions to be identified in the quotation. Where the treatment is uncertain, obtain tax advice before relying on a saving rather than trying to resolve it after invoices have been issued.
What the DIY scheme can cover
The DIY housebuilders' scheme allows an eligible individual to recover VAT on qualifying materials incorporated into a qualifying new home. The home must be for the relevant private residential use by the claimant or their relatives, not a property built for sale, letting or another business purpose. Restrictions preventing separate use or disposal can also affect eligibility. [2]
“DIY” does not mean that you must build the house yourself. You can buy qualifying materials and have a contractor incorporate them into the work. Keep the material purchases separate from supplies that should already have been zero-rated by the contractor. Incorrectly charged VAT is not made recoverable simply by putting it into a DIY claim. [2]
The scheme does not refund every item purchased for the project. HMRC lists excluded items, including professional services, tools and equipment, carpets and various domestic appliances. Check borderline purchases against its published list instead of assuming that everything delivered to the site qualifies. [2]
Keep the evidence throughout the build
Maintain an invoice schedule and retain the supporting invoices. Keep the planning permissions and any amendments, relevant agreements and completion evidence together. HMRC requires evidence that the work is lawful, and expressly distinguishes building regulations approval from planning permission. [2]
Record purchases as the project proceeds so the final claim is not assembled from incomplete records. Where one purchase contains eligible and ineligible items, identify the distinction rather than claiming the entire invoice without review.
There is one claim and a deadline
For buildings completed on or after 5 December 2023, the claim must be submitted within six months of completion. The scheme allows one claim, so check that the eligible costs and required evidence are included before submitting it. Follow HMRC's definition and evidence of completion, rather than choosing a convenient later date. [2] [3]
Self-build registration or CIL relief does not establish VAT eligibility automatically. Each regime has its own conditions and paperwork. [4] [5] [2]