The VAT reclaim scheme was introduced in 1974 (section 35 VATA) to encourage private individuals to create new dwellings. When the VAT Act came into force in 1994, this was amended as VAT refunds for DIY builders and converters. In 2009, that scheme was replaced by what we have today – VAT431.
We spoke to Andrew Jones from Andrew Jones VATman Ltd, who specialises in processing & submitting VAT reclaims on new builds under the DIY VAT431 scheme and asked him to provide his advice to our readers regarding reclaiming VAT for Self Build and conversions in England and Wales
Make sure you have read Part One before starting this one!
WHERE I WILL BE MANAGING THE BUILD AND SUBCONTRACTING AT EACH STAGE TO SPECIALIST TRADES. WHAT DO I NEED TO DO?
You don’t need to deal with the claim until your house is completed. It is good to follow some practices that will make the next steps easier. For example, you can use just one specific bank account and one specific credit card throughout the project.
This way, you will be able to track all transactions much easier. Also, it is a good idea to open credit accounts at the places you go shopping as this leaves a paper trail at credit control, which makes it easier to get copies of invoices if you lose any of them during the build.
AT WHAT STAGE OF THE SELF-BUILD SHOULD I CONTACT YOU? WHAT IS THE LATEST WHEN YOU STILL WILL BE ABLE TO SUBMIT THE CLAIM?
In an ideal scenario, we should be contacted before the first brick is in the ground. However, unless you have a problem with a company wanting to charge you the wrong VAT rate or you need clarification on something, we do not need to liaise until around a month before the build is habitable. We are always available for no-obligation advice during the build.
We have processed claims in 24 hours, not that we want to be in that situation too often. Sometimes we don’t post a claim to HMRC until the day before it is due if we were waiting on something, which is acceptable.
CAN I SHOP AT EBAY AND AMAZON AND RECLAIM THE VAT?
Online markets eBay and Amazon can be challenging platforms to shop from when building a new house and wanting to reclaim your VAT. These platforms are not only used by businesses but also by private individuals to sell goods. To reclaim your VAT, you will need a VAT invoice from the actual supplier. A PayPal receipt or order confirmation are not enough. Unless it is a massive saving, try to use the real supplier and deal with them directly.
There is no time limit on how long you have to live in the dwelling after a VAT reclaim. However, you must meet the criteria at the point of claiming – you or a member of your immediate family (with no financial arrangement) must intend on living in this property.
DOES A SWIMMING POOL QUALIFY FOR VAT EXEMPTION OR RECLAIM OF MATERIALS?
If the swimming pool is in a room within the house, the swimming pool and the room qualify for VAT reclaim and subsequently zero-rating in a new house. However, if the swimming pool is outdoors or in an outbuilding of any type, it doesn’t qualify for VAT reclaim or zero-rating by a contractor.
CAN I RECLAIM MY VAT BEFORE THE HOUSE IS COMPLETE?
You can only reclaim the VAT once relating to each property. This means that if you claim early, you cannot reclaim again for what you spent after that. If you can provide completion evidence, you can submit a claim at that point, but the VAT will be lost for anything else you spend after that.
MY INVOICES ARE IN MY COMPANY NAME. DOES IT MEAN THAT I AM IN TROUBLE?
This is potentially an expensive error. An option maybe, but this is not good practice; if you paid these invoices yourself, personally, and you can evidence this in bank statements, then HMRC will accept that. Providing you paid the original supplier directly and did this from personal funds.
WHAT DO YOU NEED FROM US TO ALLOW YOU TO SUBMIT THE RECLAIM?
Initially, we would only require the invoices to start processing the reclaim, although we would need all of the following to be able to submit your reclaim:
– Your invoices
– Your plans showing what you have built. We will need an elevation and floor layout plan at a minimum, so HMRC can see what you have built. If there is a detached garage, plans for the garage are also required
– Your planning permission. HMRC requires you to provide either full planning permission or an outline and detailed if you applied separately
– Completion Evidence
– National Insurance Number – for the main claimant or if it is a joint claim, the numbers for you both
– VAT Registration Number – if you or your partner are directly involved in a VAT registered business, such as director or owner of a business, we need the VAT Reg. No. for that company
– Bank details – for the account you want your refund paid into.
CAN I RECLAIM THE VAT ON PLANNING AND ARCHITECT'S FEES? WHAT DOESN'T QUALIFY FOR RECLAIM?
You cannot reclaim professional fees (planning costs, building control fees, architects, structural engineers etc.). Also, built-in or fitted wardrobes have strict criteria that need to be met (999 times out of 1000, your wardrobes will not qualify for VAT reclaim).
Security alarms qualify, but all CCTV cameras and equipment don’t qualify. Annexes and outbuildings don’t qualify for VAT reclaim except for a basic garage.
You can reclaim it as long as you knock the existing dwelling flat to the ground. You can use some of the existing slab, all of the existing slab, part of the existing slab and add to it or none of the existing slab and resituate the dwelling elsewhere on the site.
WHAT DOES THE PROCESS OF DIY VAT431 RECLAIM WITH DAVID JONES THE VATMAN LOOK LIKE?
After you provide us with the documents, firstly, we will read your planning permission and make sure there is nothing there that will cause a problem in qualifying for the scheme. Then, we check whether invoices have the right format, process them and prepare them to be submitted to HMRC. If there are invoices that HMRC may not accept, we will contact the supplier on your behalf and ask them to provide the correct ones.
Then we will cross-reference statements, delivery notes, credit card slips and so on against the invoices provided to make sure we have everything. We also run our own checklist of common items to make sure we ask you about anything that could be overlooked.
After we are happy that we have done everything possible to maximise your VAT reclaim, you will receive a copy of the claim for you to review and question. Once you are happy, we will fill in the forms on your behalf and check all the documentation is acceptable to HMRC and post it to their office.
Within around two weeks, HMRC will write to you to acknowledge they have the claim and ask any questions. They will research the property online to see if it is for sale or rent and check your planning and plans. If they believe that any section of your planning or reclaim does not qualify, they may ask for an apportionment.
After HMRC’s questions are appeased, the claim has then passed eligibility. This means HMRC acknowledged that you are due a refund and will now be placed in a queue for processing. This means you are waiting on a case officer to look at your invoices in detail to agree or reduce the amount that your claim was submitted for.
Around six weeks later, you will receive your package back in the mail with a letter explaining the total amount they intend to pay you and an explanation if they are intending paying you something different to the figure submitted. A week later, the funds are in your bank. If you weren’t paid as much as you claimed, we will review it and decide whether we should make a supplementary claim.
WHAT ARE THE MOST COMMON REASONS HMRC REFUSES THE DIY VAT431 CLAIMS?
HMRC will actively attempt to find reasons to refuse your reclaim in the first instance, and when you pass what is called ‘eligibility’, they will again look for reasons to reduce your claim at the point of processing.
There are a lot of reasons why HMRC can refuse your claim, but the most common are late submission, a planning restriction in relation to who lives in the dwelling, the amount of time someone can live in the dwelling, a link to a business or a condition restricting its separate disposal from another dwelling.
HMRC will check whether the property is not available for sale or rent or you are not in arrears on your personal tax or the VAT for a business in which you have a controlling interest.
IF THERE IS NO VAT ON THE INVOICE, DOES IT MEAN I HAVE PAID NO VAT?
Some suppliers, such as B&Q, Topps Tiles & Homebase etc., do not show the VAT as a separate identity in their receipts. This is very similar to, say, your Tesco receipt. Some of your shopping will include VAT, but the VAT is not shown separately on your till receipt, but I assure you, VAT was paid. Therefore, these receipts should be submitted to us, and we will review each document on your behalf.
DO I QUALIFY FOR THE DIY VAT431 SCHEME IF I BUILD A HOLIDAY HOME?
Yes, you do qualify as long as it’s a holiday home for yourself and your family and that it will not be used in the course of a business, as in renting it out on Airbnb. Therefore, it will be zero-rated for work from contractors, and you will be able to make a VAT reclaim for your purchases and reclaim the full 20%.
WHAT IF I PAID FOR THE MATERIALS WITH MY BUSINESS NAME? DO I STILL QUALIFY FOR THE VAT RECLAIM?
It is not ideal, but if the bank account you used to pay these invoices is in your name, you can request copies of your bank statements. You can match up the payments and prove you paid for these yourself personally. That would be an acceptable way out of this.
The DIY VAT431 scheme is an excellent opportunity for every Self Builder to save some money on their project and provide some cash for the finishing touches of their home.
The DIY VAT431 scheme is an excellent opportunity for every Self Builder to save some money on their project and provide some cash for the finishing touches of their home.
We hope that those articles provided you with knowledge on how to take advantage of the scheme. If you have any doubts regarding your project or would like to gain some extra confidence regarding the application, contact Andrew!
Andrew Jones, the owner of Andrew Jones VATman Ltd, specialises in processing & submitting VAT reclaims on new builds under the DIY VAT431 scheme. If you have any questions regarding your project or would like him to help you maximise the amount of the VAT reclaim for your Self Build, visit the company website and contact their experts here