Could you reduce the amount of VAT you pay on your building project? With some property sales or building projects delayed due to the Coronavirus, there will be several properties that have remained empty for longer than originally planned. If this creeps up to properties being empty for 2 years, this may mean you are able to benefit from reduced VAT on your build.
There are certain circumstances where the VAT liability for a building project can be reduced, from 20% to 5% or 0%, providing you with significant savings to your overall project cost. It is essential, however, to ensure that you receive accurate advice to leverage these savings, as the reduced VAT % does not apply to all elements of your build.
Below, we put some frequently asked questions to Julian Potts from Landmark PT, expert VAT advisors for construction and property:
In what common scenarios could I reduce the VAT liability on my project?
The lower VAT rates of 5% and 0% apply mainly to residential developments and some charitable use buildings. The main project types are:
- New builds
- New builds with retained single or double facades (on corner sites)
- Conversions to residential
- Changed number of dwellings conversions
- Dwellings that have not been lived in for at least 2 years
- Some works related to adaptations for disabled persons
- The installation of certain energy saving materials
- There are also special refund schemes for self-builders and listed places of worship
At what stage of my project should I consider the VAT position of my build?
It is generally best to consider the VAT position prior to submission of any planning applications as the VAT rules contain various conditions linked to planning consent. It can be time consuming and expensive to revisit these at a later stage in the project. As VAT is a tax on transactions it needs to be looked at preferably in advance of any planned building contract.
What documentation will I need to justify any VAT reductions to HMRC and my builder?
Generally, documentation can take any form, but it will need to be able to show that the various conditions of the VAT legislation are met. Qualifying charitable and relevant residential projects will require certification by the owner confirming the use meets the VAT criteria – there is no such certification for private dwellings despite popular belief.
Does a VAT reduction apply to all consultants, contractors and suppliers working on my project?
The lower VAT rates are limited to contractors only. Other suppliers are generally 20% VAT rated although in some instances the project can be structured so these suppliers can effectively be charged to the end user at the reduced or zero VAT rates.
Do client supplied items such as kitchens, sanitaryware items, joinery etc also qualify for reduced VAT?
It depends, some do, and some don’t. The VAT law has a specific list of items that are not buildings materials for VAT purposes, and which are always 20% VAT rated e.g. carpets, most kitchen appliances, and fitted wardrobes etc
Who should I speak to for advice on VAT matters?
We at Landmark PT are always happy to advise, manage and co-ordinate the VAT issues arising throughout the course of a building project. Alternatively, HMRC’s website has a lot of information on the VAT rules applicable to construction projects.
We, Run Projects, have recently project managed a number of builds where our clients have benefitted from reduced VAT on the construction costs. If you’d like to discuss your building or renovation project please contact us at firstname.lastname@example.org or 0207 384 1160