The DIY house builder scheme allows individuals to reclaim the VAT paid on materials and services when building their own home from scratch.
If you employ a builder then they will be able to zero rate their invoice to you. However, if you are doing elements, or all, of the building work yourself, then you will be incurring VAT on materials. The scheme enables you to reclaim this VAT. The scheme also allows you to reclaim the VAT on all building materials and fittings such as kitchens, flooring (except carpets or carpet tiles), bathrooms, curtain rails, smoke detectors and burglar alarms, fencing erected permanently around the perimeter of the property and turf, plants and trees where required by the planning permission.
If a garage is built at the same time then this can also be included as part of the claim. If built at a later date no VAT can be reclaimed.
You can’t reclaim VAT on services such as architects and surveyors, hire of plant and machinery, separate invoices for haulage and delivery, soft furnishing like curtains, carpets or appliances (unless specifically designed for heating purposes).
Timing is crucial as you have just three months from completion of the build to submit a claim to HMRC. In addition only one claim can be made so you need to manage cash flow until the project is completed.
Conversion of a Non-Residential property to your own home?
If you are converting a non-residential property to residential for your own purposes then you can also reclaim VAT under this scheme. This also applies if the property you are converting is residential BUT has not been lived in for over 10 years. In these cases a builder can supply their services at the reduced rate of 5%, however the scheme will enable you to recover the VAT.
VAT and property is a particularly complex area, whether commercial or residential and the DIY house builder scheme is just one small element. Please talk to us with regards to any property related transactions and the associated VAT or other tax consequences.
By Partner, Di Perrett.
If you would like more advice on this, please do not hesitate to contact me.