VAT for builders
Building new homes
You may not have to charge VAT on labour or building materials for work you do on a new house or flat.
What counts as new
For work to be zero-rated for VAT, it must qualify as a genuinely new, self-contained house or flat. This means:
- it鈥檚 self-contained - there are not any internal doors or connections to other houses or flats
- it can be used independently of any other property, including businesses
- it can be sold on its own
- it has proper planning permission
- any existing buildings on the site have been demolished completely to ground level (unless you鈥檙e extending an existing building to create a new house or flat)
Example
A 鈥榞ranny flat鈥� or annexe you鈥檙e building as an addition to an existing house cannot be used or sold separately to the main house. This means you must charge VAT at the standard rate of 20%.
For mixed-use buildings, like a shop with a flat above it, only the work on the residential part can be zero-rated for VAT.
Find out more about qualifying buildings for zero-rated VAT.
Timing, labour and materials
Work that鈥檚 zero-rated for VAT must take place during the construction project, or be closely related to it (for example, demolishing existing buildings and preparing the site). This is known as work done 鈥榠n the course of construction鈥�.
You cannot zero-rate work you do after a building鈥檚 finished, apart from correcting defects in the original work (鈥榮nagging鈥�).
All labour on a qualifying building can be zero-rated, but there are special rules on what counts as building materials for VAT purposes.