If looking to build a new home, you can save some money in VAT in the form of building services and materials. Although unknown to many, some of these savings can be significant giving you a chance to achieve your dreams. This however requires proper understanding of VAT rules among other areas. Here are a few tips to get you started.
What and When you can Reclaim VAT On
We will not provide a complete list of items and services that qualify for tax relief. This is because some of these are subject to change. To learn of the things that you can reclaim VAT on, consult with the HMRC before the ground breaking ceremony or visit VATIT to find out more.
In most instances, only self-contained and separate builds qualify for Vat reclamation. The build must however be meant for your family to live in, or for your family’s holiday alone. In other words, buildings meant for business, buy-to-sell, and buy-to-let does not count for relief. You can however have a room for a home office in the build.
You can also reclaim VAT on building materials as well. This however doesn’t include equipment hire or professional services of a project manager, surveyor, or an architect.
Builder/Contractor and VAT
The builder shouldn’t include VAT on their quotes. Although you might know this already, all the work on the new build is zero-rated. For this reason, you cannot reclaim VAT here since it charged in the first place.
The builder can however reclaim VAT on any materials purchased for the new build. These materials need to be VAT registered to qualify. You also cannot reclaim tax for materials offered as part of the service. Any materials included in the builder’s service are non-taxable. That said, avoid getting building supplies from a non-VAT registered contractor. If you do, you will be impossible to reclaim VAT on any materials they have supplied. A non-VAT registered contractor cannot reclaim VAT either.
As mentioned earlier, you need to decide whether you will be reclaiming VAT on materials or not. If getting the materials through your building contractor, you won’t need to pay VAT. If you plan to reclaim VAT yourself, you’ll then need enough budget to pay for everything upfront (including tax). It’s worth noting that, you can only reclaim VAT after the building project is completed. On completion of the project, you’ll need a later from the local authority and proof of everything before making the application.
If working on a tight budget, you can opt to get the materials from a builder instead. This way, you won’t have to pay for the VAT. The VAT is however only reclaimable within three months of completing the project. Most claims are processed and refunds issued 30 days after the claim is submitted.
Keep A Record of All Payments
Without records, you won’t be able to reclaim VAT. For this reason, every document related to the build should be kept safely to use when submitting the claim. These include credit notes, building plans, planning permission, invoices, and bills. Only original documents can be used. For this reason, you need to avoid any electronic payment receipts, or emails confirming an order or two, as these aren’t viewed as valid VAT invoices.
The record of payment should contain relevant information such as the invoice date, description of goods/services, VAT number, invoice value, and supplier name to be considered valid. Take time to check all paperwork to ensure everything is entered correctly before making the application.
Get the Right Advice
You only have one shot at filing VAT claims. That said, you need to make the one chance worthwhile by getting everything right the first time. Any mistakes with the paperwork will only make the process more tedious and lengthier. Most tradespersons and builders understand VAT rules pretty well, hence should be able to advise you on what to do. Be sure to double check everything before putting it down in writing. A simple mistake could be too costly for you.
You can also seek help from a VAT reclaim expert. These individuals are well-versed with VAT rules and will most likely identify a mistake with the paperwork an untrained eye wouldn’t see. That said, you can still check with the HMRC website to see information and guidelines on how to reclaim VAT.