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Bobs for the builder: the DIY VAT Housebuilders scheme

30th Sep 2016
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Laurence Vogel explains how the VAT DIY Housebuilders Scheme works

The VAT DIY Housebuilders scheme is an HMRC scheme that has been designed to ensure that a homeowner building a home can benefit from the special VAT rules that allow the qualifying construction costs of new homes and certain conversion works to be zero-rated. The use of the scheme allows homeowners to be put in a similar position to a property developer.

There are two main forms for reclaiming VAT. The first form (VAT 431NB) is designed for new builds and the second form (VAT431C) is designed for qualifying conversions, i.e. the conversion of a non-residential property to residential. 

Qualifying conversions (VAT 431C form)

The following types of conversion are eligible to use the DIY Housebuilders scheme:

  • The conversion of a previously non-residential property into a dwelling to be used either by the homeowner or their relatives as a family home for residential or holiday purposes.
  • The conversion of a previously residential property for either the homeowner or their relatives, that has not been lived in for the past 10 years or more, into a family home for residential or holiday purposes.
  • The purchase of a converted building as a ‘shell’ from a developer which has been fitted out to completion, for either the homeowner or their relatives as a family home for residential or holiday purposes.
  • The conversion of a building into one that is intended solely for a Relevant Residential Purpose.

Qualifying new builds (VAT431NB form)

  • The construction of a new dwelling to be used either by the homeowner or their relatives as a family home for residential or holiday purposes.
  • The purchase of a new building as a ‘shell’ from a developer which has been fitted out to completion, for either the homeowner or their relatives as a family home for residential or holiday purposes.
  • The construction of a new building that is intended for use solely for either a Relevant Charitable Purpose or a Relevant Residential Purpose.

Business related claims

Any claims made for a business related reason will be rejected. VAT on business related activities can only be claimed if the business is VAT registered.  Homeowners that work from a home office are usually eligible to make a claim.

Making a claim

Claimants need to be aware that only VAT that has been correctly charged is eligible to be claimed as part of the scheme. For example, if a builder charges VAT on services which should have been zero-rated the homeowners only recourse is with the builder who should ensure that his supply has been correctly treated.

A claim can be made for qualifying building materials on which VAT has been charged. Qualifying materials include most materials incorporated into a new building or conversion, which cannot be easily removed. There are a number of exceptions including fitted furniture, carpets, and some domestic appliances.

Homeowners can also claim for building materials purchased from another EU member state by converting the amount of VAT paid into the sterling equivalent and providing proper evidence of shipping, etc.

Building a new building is zero-rated for VAT so no VAT should have been charged. Homeowners cannot claim for any professional or supervisory services associated with the building.

No claim can be made until all the building work is finished and evidence of completion must be provided to HMRC together with the claim.

HMRC will accept any of these as evidence that the work is finished:

  • A certificate or letter of completion from the local authority, for Building Regulations purposes or otherwise.
  • A habitation certificate or letter from the local authority – in Scotland, a temporary certificate of habitation.
  • A valuation rating or Council Tax assessment.
  • A certificate from the homeowners bank or building society with the wording below:

    ‘This is to certify that the ...... Bank*/Society* released on ...... (date) the last instalment of its loan secured on the dwelling*/building* at ........... because it then regarded that building as complete.’

There are also special time limits that should be adhered to when making a claim. A claim must usually be made within three months of the completion of the conversion or new building using the appropriate form.

• Laurence Vogel is Head of UK Operations at Informanagement

This article is taken from “Accounting Practice” the ICPA quarterly magazine. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk or email [email protected] or by phone on 0800-074-2896.

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