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VAT Housebuilders Scheme


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19th June 2013

One of the more well known VAT schemes is the Do It Yourself Housebuilders’ Scheme, which aims to put those undertaking a house building project on a level footing, in VAT terms, with commercial builders. However, this means the scheme is not necessarily as clean cut as it may first appear.

Depending on the project being undertaken it may be that it may not qualify for the scheme at all, or that only certain aspects of it will be able to have VAT reclaimed. And in terms of savings, you may find any work being done by building contractors is already at a reduced or zero rate, and so there may not be any savings to be had.

The scheme itself applies to the construction of a new dwelling, or the conversion of a previously non-residential building into a dwelling. Additionally, this must be what HMRC describes as a ‘self contained dwelling’, so the building of what is colloquially known as a granny annex would not qualify for a VAT refund. Interestingly, however, if you buy a shell or partially completed dwelling from a developer and finish the work yourself it would qualify.

A claim can only be made at the end of the project, and so there are cash flow issues to be aware of. You can claim back the VAT on any goods you purchase, including goods bought in the EU (although you need to have extra supporting documentation for these, as well as services rendered by a builder although these will often be zero rated or at the reduced rate of VAT anyway. Professional services such as project management, architect’s fees, surveyor’s fees, and suchlike are not able to have the VAT on them reclaimed. Likewise the VAT paid on the hire of tools and plant is not eligible.

Rob McCann, Director at The VAT People, warned of the dangers of people using the scheme and not understanding how it properly works.

“DIY claims can often be highly subjective, and a couple of recent tribunal cases have hinged on just that issue. One was decided for the taxpayer and one against, but the tribunals listened to the facts that were presented and judged them against the laws that are set down.”

“Each case will have its own merits, and each property is potentially different. It will very much depend on the physical property and what is happening, and it is important to get specialist advice at the outset to protect yourself from any hidden surprises.”

About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.

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Article Published/Sorted/Amended on Scopulus 2013-06-20 11:06:55 in Tax Articles

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