{"id":471,"date":"2016-01-26T22:08:01","date_gmt":"2016-01-26T22:08:01","guid":{"rendered":"http:\/\/renovateme.co.uk\/blog\/?p=471"},"modified":"2018-09-07T19:17:00","modified_gmt":"2018-09-07T19:17:00","slug":"vat-self-builds-diy-conversions","status":"publish","type":"post","link":"https:\/\/renovateme.co.uk\/blog\/vat-self-builds-diy-conversions\/","title":{"rendered":"VAT on self-builds and DIY conversions"},"content":{"rendered":"

If you’re building a new home or converting an existing property into a dwelling, you can claim VAT on certain goods and\/or services under the VAT DIY Housebuilders and Home-converters refund scheme.<\/strong><\/p>\n

This can be a very useful saving and make a significant difference to the project’s overall cost. Also, certain contractors’ services qualify for the zero-rate or reduced rate of VAT, so that’s another way of saving VAT.<\/p>\n

But as with all things VAT related, the rules are complicated and I’ve seen many situations over the years where DIY builders have had claims rejected by HMRC, meaning that they end up having to find additional money to fund the project. If you’ve borrowed \u00a3215,000 including \u00a315,000 to cover VAT costs, but HMRC refuse your claim for the \u00a315,000 VAT, then you may find yourself having to borrow more money at a higher rate of interest. I’ve even seen situations where people have had to sell their newly built dream home because they can’t fund the additional VAT cost.<\/p>\n

And, because most “DIY” builders\/converters are private individuals, it’s often their first time they’ve dealt with VAT and they often don’t fully understand all of the rules.
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\nThese situations are bad enough if you’re running a business, but just think about the stress and disappointment you could face if it’s your family home and you’re currently living with relatives, or in rented accommodation with your children and you find that you can’t afford to move in
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\nI’ll be discussing this subject over the next couple of months, but let’s start with the main principles of the reclaim scheme and the main problem areas.<\/p>\n

How does the refund scheme work?
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\nThere are two separate schemes; one for new build and one for conversions. The principles are similar and the process is the same.<\/p>\n

The main difference is that in the case of new build, you can only claim VAT on goods; whereas for conversions you can claim VAT on contractors’ services and related goods. The reason is quite logical: contractors’ services for new build are generally liable for the zero-rate of VAT, whilst the 5% reduced rate is charged for conversions.<\/p>\n

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In either case, you have to submit your claim with invoices within three months of completion of the project.<\/p>\n

HMRC guidance and forms
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\nHMRC’s guidance<\/a> is very helpful and explains the rules in everyday English, at least for the most part.<\/p>\n