D-I-Y VAT for a D-I-Y Housing Project

The VAT D-I-Y scheme allows an individual, or an organisation, to construct or convert a building for their own use, and claim back the VAT on materials purchased for the project (although this is subject to speficied exclusions). Conversion service supplies will be charged at 5% and construction service supplies will be zero rated, for a new build. The purpose of the scheme is to put the individual or organisation in the same position as someone purchasing from a property developer.

However, there are some very important differences between a private party and a property developer when it comes to claiming back the VAT:

  • A developer is able to claim back VAT on a monthly basis, for a private party they are only able to claim at the end of the project, and within 3 months of completion. Therefore, they have to be able to fund the VAT for the duration of the project.
  • A developer is allowed to reclaim VAT on professional fees, private parties are not.

Eligible projects

  • The construction of a private dwelling.
  • The conversion of a non-residential building to a private dwelling. Barn conversions are included within this category.
  • The construction of a new building exclusively for use for a ‘relevant residential purpose’ or a ‘relevant charitable purpose’.
  • The conversion of a non-residential building exclusively for use for a ‘relevant residential purpose’ or a ‘relevant charitable purpose’.

HMRC Guidance

HMRC have published combined notes and claim forms:

  • VAT 431NB (for a new build)
  • VAT431C (for conversions)

If you are claiming, you should obtain a copy as soon as possible:http://search.hmrc.gov.uk/kb5/hmrc/hmrc/results.page?qt=vat431

A detailed line by line schedule of invoices need to be submitted, either by MSExcel or a similar spreadsheet. Furthermore, original invoices have to be submitted.

Important points to consider

  • Inform suppliers of services to charge VAT at 5 % – HMRC will not repay VAT at 20% for this.
  • When buying land you should inform the vendor that no VAT should be charged – HMRC will not repay the VAT on purchased land.
  • The legal definition of a ‘dwelling’ excludes a situation where there is a restriction in the use or disposal of the building.