The construction of a new home is fascinating to most people in the UK. You are fantasising about your ideal home, yet expenses are quickly rising. Value-added Tax, or VAT, is one such large cost. The question is, is it possible to claim VAT on new buildings? The answer to this is neither a simple ‘yes’ nor a simple ‘no’.

This guide will explain the VAT charged on new buildings in a simple manner. We will discuss when you are allowed to get money back, how, and what the rules are. In the event that you are planning a self-build project, this assists you in saving money on VAT.

Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help about VAT on a new build property.

When Can I Reclaim the VAT on a New Build Property?

You can recover VAT on a new build property provided that you satisfy important conditions.

• First, you have to build a new house on your own. This is a house or a flat, where you and your family live . You are also able to reclaim VAT, in case you purchase a bare shell of a developer and complete it yourself. Holiday homes are also included, provided they are used by relatives. The crucial condition is that the dwelling must not be intended for business purposes.
• Obtain planning permission first. You must have permission or an outline with details granted. In certain cases, permitted development rights work well. The property has to be independent; the rules of planning cannot make it dependent on another structure that you cannot sell independently.
• You are not going to sell or rent it out immediately; you are going to live there. You may not be eligible in case business use is found, such as operating a shop at home. Family members are spouses, children, parents, and siblings. Acquaintances or remote kinsmen do not count.
• Check the deadline. For buildings completed on or after 5 December 2023, you must submit your claim within 6 months of the project’s completion. For builds completed before that date, the deadline is 3 months. Completion is when the local council issues you with a completion certificate, or the property becomes habitable.

Thousands of pounds are recovered by many in this way. In the case of a £200,000 construction,  you can recover the £40,000 VAT paid on eligible materials you purchase yourself. Always check with HMRC when in doubt.

How Much VAT Can I Claim Back on My Self-Build?

You can claim back most, but not all, of the VAT you pay on building materials for your self-build. The standard rate is 20%, and there’s no maximum limit. It depends entirely on what you spend.

In most cases, construction services (such as labour from builders or electricians) are zero-rated, so you don’t pay VAT on them in the first place. The refund mainly applies to building materials you buy yourself from VAT-registered suppliers.

For example:
If you spend £100,000 on eligible materials, you’ll pay £20,000 VAT, which can be reclaimed through the VAT refund scheme.

However, not every item qualifies. For instance, carpets are excluded, but floor tiles and wooden flooring are eligible. So, if you spend £5,000 on carpets and pay £1,000 VAT, you can’t reclaim that £1,000.

Your total claim equals the VAT on all eligible invoices you submit to HMRC, supported by receipts.

What Will I Need to Submit with My VAT Claim?

There are documents you require to file with your VAT claim.

• Begin with evidence of completion of the new build. Obtain a completion certificate from your local building authorities. This demonstrates that the build is complete.
• Included are planning permission papers, all the approvals, including Section 106 agreements (where applicable). These include things such as affordable housing regulations. When the permissions were changed, provide the updated ones.
• Building plans are useful as well. What you built, these presents and correspond to the permission.
• The most important ones are the VAT invoices. Record all of them under materials purchased. Every invoice should include the name of the supplier, VAT number, date, your name and address (when you are buying in large quantities of £250 and above), description of the item, price, and the amount of VAT. If you file online, you will not submit them initially, but HMRC will request a selection for inspection.

List all of them using the HMRC invoice template (VAT431NB or VAT431C). This template helps you record the details and calculate the totals. In case you hire contractors, their services for a new build should be zero-rated (0% VAT) and you will have no VAT to claim back on their invoices. HMRC rejects your claim if your claim is missing important documents. Double-check before sending.

How Do I Submit My Claim?

You can file your claim fairly simply online or by post. One can go to the HMRC site and use their online service to get quick results. Search and click “claim a VAT refund as a DIY housebuilder”. Complete the form with your information, project information, and the sum of the claim.

Download form VAT431NB at gov.uk. Complete it, and send it to the address on the form. Add all the supporting papers; more of this later. Appoint an agent should you need assistance, such as a builder or accountant. Use form 64-8 for this. But HMRC refunds you the money only to your bank account.

Processing takes time. Online claims are usually processed within about 30 working days, while postal claims may take a little longer. If HMRC finds any errors or missing information, they’ll contact you for clarification. Respond to them at your earliest convenience to avoid delays.

You can follow your claim online. Keep copies of everything. In case you have committed intentional mistakes, you will be penalised.

What Kind of Building Projects Can I Reclaim the VAT On?

You can recover the VAT on certain building projects. The main ones are new dwellings. Constructing a house from the very foundations? Yes. Convert a barn into a home? Yes, that is covered by the self-build refund scheme (under the conversion rules, provided the building was previously non-residential). You can reclaim the VAT on eligible costs.

Self-builds are at the top of the list. The home is built by you or the builders you employ. One home (such as a house and detached garage built together) is counted as a single unit. Charity projects may also qualify for VAT relief if the building (such as a hospice or community hall) is used solely for non-business charitable purposes.

Other types of residential buildings that may qualify for zero or reduced-rated VAT include student halls, care homes, and military accommodation. Garages constructed with the house are eligible in case of use with the house.

Are There Any New Build Projects Where I Can’t Claim Back VAT?

Yes, there are new build projects, for which you cannot claim back VAT. Provided that you intend to sell the home immediately after construction, no claim. The scheme is beneficial to those who reside there and not developers. The following realities don’t let you claim VAT:

• The use in business is disqualifying. Part-time business may also create troubles, even apportionment where you can, but that is difficult.
• The restrictions of planning are important. Claim denied, in case some rules restrict you from selling the home separately from land or another building.
• No claim in case you hire a plant or tools and fail to integrate them.
• Architects’ or surveyors’ Professional fees remain at 20% VAT, no refund.
• Changes in use hurt, too. Sell within 10 years? You might pay back some VAT.

Full exclusions are found in HMRC Notice 708.

Which Materials Can I Reclaim VAT On?

You can reclaim VAT on building materials that are incorporated into the fabric of the dwelling — that is, items fixed in such a way that their removal would cause damage or require tools.

Eligible examples include:

• Bricks, cement, timber, roofing, windows, doors
• Plumbing (pipes, sinks, baths)
• Electrical wiring, sockets
• Boilers, radiators, underfloor heating
• Fixed flooring (tiles, wood, laminate — not carpets)
• Fitted kitchen units and fixed worktops
• Insulation, solar panels, and paint for interior use

Always refer to HMRC VAT Notice 708 for the full list of eligible and excluded materials.

What Materials Can I Not Claim Back VAT On?

VAT claims disqualify some materials:

• No furniture other than kitchen units.
• The majority of the appliances: Fridges, ovens, and washing machines.
• Carpets, carpet underlay.
• Green ornaments, sheds, greenhouses, and ponds.
• Tools, equipment, such as ladders, exercises – unless they are a part of the construction (uncommon).
• Supplies: Scaffolding, skips, hired.
• Electrical extras: Doorbells, free-standing fans.

The Bottomline

Reclaiming VAT back on new builds saves you money on your dream home. Know the VAT on new buildings, and comply with HMRC regulations.

If required, consult with a tax consultant or contact HMRC.

The VAT on most items is 20% but you can claim it back in case your project is qualified. When you purchase materials yourself, you pay VAT initially and claim it subsequently. Self-building is more equitably qualifyable for VAT reclaim. Take what you are entitled to.

Reach out to our intelligent and clever-minded guys to get the answer to your queries in the UK, we will get to your answers quickly. We will help to decide how to deal with your tax implications.

Disclaimer: The general information provided in this blog about VAT on a new build property includes text and graphics. It does not intend to disregard any of the professional advice in the future as well.