DIY Housebuilder Scheme For New Builds

The DIY Housebuilder Scheme was introduced by HMRC to put people building their own house in the same position as if they had purchased a new build from a construction company.  When buying from a construction company, the supply of a new build is zero rated for VAT purposes and therefore no VAT is charged on the purchase price.  Therefore, for a DIY builder who is suffering VAT at 20% on building materials purchased for the build, a claim can be submitted to HMRC to refund this back. Paula Mason, VAT Manager, explains the qualification criteria and how to make a claim

Qualifying Conditions

In order for the claim to be successful, the building has to qualify for the scheme.

The property being built:

• Must not be used for business purposes
• Must be constructed for the use of you or your relatives as a residence or holiday home or purchased as a shell from a developer and fitted out to completion for you or your relatives as a residence or holiday home
• Must not have direct internal access from it to any other dwelling or part of a dwelling
• Must consist of self-contained living accommodation
• Must have planning permission granted and the construction must be carried out in accordance with this
• Must be capable of separate use and disposal

If any of these conditions are not met, a DIY claim cannot be made and any VAT incurred on building materials and services are likely to be charged at the standard rate of 20%.  Examples of non-eligibility would be:

• The construction of a property that cannot be disposed f or used separately due to a condition of the planning permission
• The construction of a property that neither you or your relatives intend to live in but where the intention is to sell, let or use for any other business purpose. A business purpose includes constructing a property where you need to live for your work

Making a Claim

You can claim for any VAT suffered on the building materials incorporated into the building and its site. For information about what building materials you can claim for, you can see these detailed below.

It is important to check you have been charged VAT as there will be no VAT to claim on zero rated goods and services, i.e.. if a VAT registered builder has done the work for you and not charged you VAT, or on supplies purchased from non-VAT registered traders.

The claim must be accompanied by documents to prove that the work carried out is lawful and that planning permission has been granted.  Planning permission could consist of either full planning permission, outline planning permission and approval of reserved matters or permitted development rights, e.g. a local development or neighbourhood development order.  If the planning permission has been issued in two parts, as an outline and an approval, both parts need to be sent to HMRC.  If the planning permission has been revised or amended, both this and any previous permissions need to be sent.

Full plans and a completion certificate also need to be sent with the claim.  The completion certificate certifies that the building is complete and is issued by the relevant planning authority.

Claims can be made online and must be made within six months after completion.  Only one claim is allowed.

Building Materials

VAT on building materials which are incorporated into the building can be refunded in full.  Being incorporated means being fixed in such a way that its fixing or removal would either need the use of tools or result in the need for remedial work to the fabric of the building or its site or substantial damage to the items themselves.

Examples of items incorporated in the  building or its site include:

• Boilers and radiators
• Wired in Storage Heaters
• Flooring (but not carpets)
• Fitted Kitchens (but not white goods, or ovens and hobs)
• Landscaping, including turf

Examples of Items not incorporated in the building or its site include:

• Free standing furniture or fitted furniture (with the exception of fitted kitchens)
• Vanity units and wall units, e.g. bathroom cabinet
• Appliances that can be plugged in
• Ornamental works including fishponds
• Sheds and greenhouses
• Plant, tools, equipment and consumables, e.g. sandpaper

If you would like to discuss the VAT DIY Housebuilders Scheme for new builds or any other VAT property and construction matter please contact Paula by emailing hello@scruttonbland.co.uk or calling 0330 058 6559.