VAT queries with New build

craighewer18

Hi there

My girlfriend and I have recently purchased a new build from a developer, currently going through 1st fix, planning to complete towards end of November.

The developer has given us various allowances on flooring/tiles and kitchen etc. With various ways to pay, either put them on his account with the merchants and we pay him any extra, or we purchase them ourselves then he gives us the cheque for the allowance amount. Having read up recently about reclaiming VAT on new builds, I presume the best way to pay for the flooring would be to pay for it myself VAT included then reclaim the VAT once the build is complete?

Also I'll need someone to fit the flooring and have also read about the zero rating on labour with new builds. How do I go about getting a carpenter to zero rate the work? Do I need to provide any paperwork? I presume if he refuses to zero rate, then I would not be able to claim the VAT back later on?

Thanks in advance

leveller2911

I thought it was the builder who claims back the vat as they are registered for vat and not the customer.

I'm vat registered and I've never had a customer be able to claim back the vat on any work.

Not sure if its still the case but the builder could claim back the vat only once on a build so they would complete the build and then claim back the vat and not numerous claims throughout the build but AFAIA customers can't calim vat back....... I may be wrong though..

craighewer18

Hi Leveller,

I thought the same, only the builder could claim VAT back on materials HE has purchased which I think is still the case, but if you buy the house 'shell' from a developer/builder and kit it out yourself with kitchen/flooring/bathroom suites etc. you are entitled to claim the VAT back on the materials. Which i guess is the situation were in. We buy the flooring/tiles/bathroom fittings etc. Here's a quote from HMRC:

"Is your claim for the fit-out and finish of a building shell?
If you have purchased your building as a ‘shell’ from a developer, or had the ‘shell’ built for you, you can claim back the VAT paid on the fitting out costs.

A shell is a building that is structurally, but not functionally, complete. It will possess all the basic structural features (such as the walls, roof, doors, windows and utilities connections) but will lack some or all of the facilities that will enable it to function as a modern dwelling. This will include work to install fixtures and fittings such as kitchen furniture and other essential features. If the only work required to be done is to decorate the building, the house is considered to be both structurally and functionally complete and VAT on the costs of decoration may not be recovered."

I don't think many people in our situation are aware you can do this. I don't know the full ins and outs yet, I'm having a meeting tomorrow with the builder to discuss the options.

southcoastrgi

you shouldn't be charged any vat on a new build either labour or materials if the person doing the work is vat regd, as they will claim back the vat on the materials.
However if the person doing the work isn't vat regd then he will be charged vat at the merchants which they will include in your price, as far as I'm aware (although quite happy to be corrected) you can't claim any vat back if you aren't regd

Link here

leveller2911

Hi Craig,
Interesting thread and as I mentioned I may well be wrong.As an example one question.If for instance the downstairs floors are screeded and you intend to fit a timber floor over the screed I would see this as not being vat refundable because the house is not a shell as such because there is a screed floor and this would be classed as "functionally complete" so no vat refund. If however your timber floor is being fitted to timber joists this would not already be "functionally complete" and so vat refundable......You really need to get some good advice about vat and not necessarily from the builder.

The vat rules are very,very difficult to understand even for those of us who are vat registered.But I'm fairly sure you (the customer) can't make the claim ,any refund would need to be done by the builder......

craighewer18

You're not wrong, VAT rules are hard to get your head around! Here's the reclaim form, with a guide below it for anyone interested and to anyone who can put it into Laymans terms.

http://www.hmrc.gov.uk/forms/vat431nb.pdf

There are weird rules regarding what fixtures/fittings you can and can't claim for like you can claim VAT back on wooden flooring but not carpets and you can reclaim on things like curtain poles but not the actual curtains! It's all in the link for anyone interested

Thanks

leveller2911

.

http://www.hmrc.gov.uk/forms/vat431nb.pdf

There are weird rules regarding what fixtures/fittings you can and can't claim for like you can claim VAT back on wooden flooring but not carpets and you can reclaim on things like curtain poles but not the actual curtains! It's all in the link for anyone interested

Thanks[/QUOTE]

I would strongly recommend you seek advice from an accountant who deals with the HMRC and the rules for vat.

The problem I see is what exactly denoted a "shell" of a building and to be honest the link you posted is not detailed enough.......... Seek advice other than the builder.As you have not done a self build (ie actually built the house yourself) I still don't see how you personally can claim back the vat...

Theres a guy on here Jason LVC who is the dogs danglies and may see your post.....

craighewer18

OK cheers mate, hopefully he'll come along soon

JasonLVC

Hi

The self-build DIY scheme can seem complex becuase there appears to be many rules (and there are), but once you understand the basic concepts then it should get easier to understand.

But first, zero rating. Zero rating applies to "the construction of a new dwelling". A new dwelling is one that did not exist before (or if a shell, has not been lived in/completion certificate issued).

The zero rating applies to "the construction of..." which means buying materials on their own from a merchant will not be zero rated, it is the action of having the materials installed or fitted which brings the zero rating.

So, if you buy the materials yourself and then give them to a contractor to fit then the contractor can zero rate his labour but you are stuck with the VAT on the materials you bought. So if you get the contractor to buy the materials and fit them he will likely add a mark-up on the materials so the materials may cost more BUT he'll zero rate the materials and labour/install costs.

If you buy and fit materials yourself or give to contractor to fit, the only way to get the VAT back on the materials is via the self-build DIY claim. The claim can only be made once, usually at completion certificate stage and so you may have cashflow problem if you have to buy all these things in advance. I guess it depends how much more finishing off is required before you can complete the property. If a few weeks/couple of grand then do a self-build claim but if many months, tens of thousands you may want to avoid VAT in first place by having contractor buy and fit materials.

Hopefully that deals with the zero rating rules

JasonLVC

The self-build claim itself will be fine for a shell building. It is not unusual to see a developer part-build a new dwelling (the shell) and then sell onto someone else to finish off. The original developer has "developer" status initially and when he sells the house to you, he sells at the zero rate (as his entire efforts have been in "constructing" a new dwelling" so far).

The original developer, having charged zero rate VAT on sale to you allows the original developer to reclaim all his input VAT (VAT on purchases).

As you have acquired a part-finished new dwelling, you then adopt the "developer" status until it is completed. Therefore, you are in the same position as the original developer in that you are "finishing off a new dwelling". It technically becomes a "new" dwelling once completion certificate has been issued. After that it is no longer "new" for VAT purposes.

You can either then finish the property and sell it - zero rated - but you'd obviously have to register for VAT to reclaim the VAT back on your costs OR you keep the house for yourself and submit a self-build DIY claim and claim the VAT back at end of project.

JasonLVC

Self-build rules appear complex but the basic logic is this "If the items can be removed easily without tools or instruments" then they are unlikely to be seen as "fixtures and fitting commonly found in a dwelling".

So, carpets can be put down and picked up using your bare hands so not "fixed", whereas wood flooring, lino or tiles are all glued down semi-permanently and so are okay as fixed items and for VAT reclaim. With kitchens, the worktop is usually bolted to the walls and the extractor also, but the white goods like fridge and dishwasher just slip into the gaps and plugged in. Even if the white goods are clipped into the wall/frame this is still not seen as a permanent fixture, so its a no go for the Smeg/Miele stuff!

Radiators, doors, curtain rails, lighting, light switches all need to be fitted using a small amount of skill and some form of tool like a screwdriver or hammer/nails. It's a good basis for what you can and cannot claim. Don't go into thinking over-drive on this, just use common sense. Boilers and toilets = yes, headboards and window nets = no.

The claim itself, HMRC will only refund VAT where it was properly charged, so materials from the builders merchants will be fine, but if you have any invoicess from say a landscape gardener or a subbie who did some wiring - if they have VAT on the invoices HMRC will reject them becuase these invoices should have been zero rated by the contractors in the first place, so HMRC will send you back to the subbie/contractor to get a credit note, HMRC cannot in law refund you VAT charged in error by someone else.