I know that many UK readers of this blog are interested in Value Added Tax (VAT) in relation to conversion projects. As we’ll be nearing the end of our own project over the next couple of months (fingers crossed), I thought a refresher on what the current policy is and what you need to do to make a claim was in order.
So here’s my brief & scrappy mbc summary of how to prepare for your VAT reclaim.
Read Notice 719.
Selected Highlights:
Non-residential building converters both professional and amateur can reclaim VAT on eligible goods and services, or in more words…
Developers can recover, through their VAT return, the VAT on their costs that relate to zero-rated or standard-rated sales. They cannot recover VAT that relates to exempt sales.
The Refund Scheme puts DIY builders and converters in a broadly similar position to a developer selling a zero-rated property, by refunding them the VAT on their main construction or conversion costs.
For conversions, you can also claim for the VAT on conversion services supplied to you.
Scope
If, […] you are carrying out the conversion of a non-residential building […] you can claim the VAT charged by your builder for converting the building.
Who does the work?
You need not carry out all, or any, of the work yourself. You can claim for eligible goods you buy and give to your builder to incorporate into the building (or its site) provided that the work is done before the date of completion.
Then skip to Section 7 and read 7.1 What is a non-residential conversion? to check the status of your conversion.
We’re then into the meat, What can we reclaim VAT on?
Starting with the exclusions:
- Fitted furniture, other than fitted kitchen furniture;
- Most electrical and gas appliances (Broadly you can claim for electrical appliances used for the purpose of heating, lighting, ventilation, security, hygiene, mobility or amplification in places of worship!);
- Carpets, underlay and carpet tiles;
- Garden ornaments, sheds and greenhouses;
- Plant, tools and equipment;
- Consumables such as sand paper, that are not actually incorporated in the building;
- Land.
So you can claim for building materials that are ordinarily incorporated into that type of building during the course of the conversion. Definitions of these terms following throughout section 8.
What VAT Rate should I be charged
I think I’ve already done this one to death on this site, but here we go again…
For conversions, a builder can sometimes charge VAT at the reduced rate of 5% or, if you are a housing association, at the zero rate.
Bear in mind that…
Claims must be made no more than three months after the construction or conversion is completed.
…
Normally [a building can be considered as completed when] it has been finished according to the original plans. In cases of doubt, a building can be regarded as still under construction up until the date when a certificate of completion is issued by the local planning authority.
That’s the background out of the way, assuming you’ve been keeping your receipts the next step is…
Complete the claim forms.
Either phone 0845 010 9000 and ask for a claim pack or download the forms from these links that I’ve generously provided:
VAT 431 part 1 Claim form VAT Refunds for DIY Builders
VAT 431 part 2A Description of building and quantities of goods and materials used
VAT 431 part 2B Description of services for DIY conversions
VAT 431 part 3 Goods, materials and services claimed for which the invoices show VAT separately
VAT 431 part 3 continuation sheet
VAT 431 part 4 Goods, materials and services claimed for invoices not showing VAT separately
VAT 431 part 4 continuation sheet
I’ll keep you updated as my own claim progresses…
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