Purchasing a new home from a property developer exempts one from paying VAT, as the sale is zero-rated. Conversely, individuals building their own homes do not receive this benefit. The VAT DIY Housebuilders Scheme aims to level the playing field by allowing self-builders to reclaim VAT on building materials purchased during the construction process
A DIY housebuilder is eligible for this scheme if they have planning permission to:
- Construct a new dwelling intended for use as a family home, either for residential or holiday purposes, by the DIY builder or their relatives.
- Purchase a new building as a shell from a developer and complete it for use as a family home for residential or holiday purposes by the DIY builder or their relatives.
However, refunds cannot be claimed if the property has been constructed under a planning condition prohibiting separate sale or use, or if the property is intended to be sold, let, or used as a business rather than being occupied by the DIY housebuilder or their relatives.
Evidence of Planning Permission
To claim a VAT refund, one must provide evidence of lawful works. This requires sending copies (not originals) of full planning permission, outline planning permission and approval of reserved matters, or permitted development rights. If the planning permission comprises two parts, both parts must be supplied. Additionally, if the permission is subject to a Section 106 Agreement, this must also be included.
No Need to Do All the Work Yourself
DIY housebuilders do not need to complete all or any of the work themselves. They can employ builders and other tradespeople. Refunds can be claimed on eligible goods purchased by the DIY housebuilder and given to the tradespeople for the construction work
Rate of VAT
Most building materials are subject to VAT at the standard rate of 20%. However, contractors will charge VAT at the same rate as their services. For the construction of a new qualifying property, building materials supplied by the contractor will be zero-rated.
Claim Limited to Building Materials
Refund claims can only be made for VAT on building materials. VAT on items such as fitted furniture, most electrical and gas appliances, carpets, underlay and tiles, garden sheds, greenhouses and ornaments, plant, tools and equipment, consumables not incorporated in the building (like sandpaper and white spirit), and building land cannot be reclaimed.
Amount of the Claim
Only the VAT actually incurred can be reclaimed, typically shown on the invoice. If VAT is charged at the standard rate, the VAT element is one-sixth of the total amount. No VAT can be reclaimed on items charged at the zero rate or from suppliers not VAT-registered. Records of all invoices, bills, credit notes, and other supporting documents must be kept and recorded using the schedule of invoices template (see further guidance at www.gov.uk/guidance/vat-refunds-for-new-builds-if-youre-a-diy-housebuilder).
Making the Claim
For builds completed on or after 5 December 2023, only a single claim can be made under the scheme and must be submitted within six months of completion. Claims can be made through HMRC’s online service or using form VAT431NB. For online claims, HMRC will provide a claim reference number within two weeks and process the claim within three weeks from receiving all required information. Postal claims may take longer. HMRC will notify the claimant if the claim was successful and when the refund will be paid, or if it has been rejected or not paid in full, and why. In case of rejection, the claimant can request HMRC to review the decision or appeal to the tribunal.
