VAT queries with New build

JasonLVC

So, just the DIY claim itself outstanding (if you go down that route).

Crucially, you have 3 months from completion certificate to submit a claim. Timing is therefore key, get it wrong and you will not be able to get any VAT back from HMRC. Appreciate you may be focused on grander things like finishing off a show-piece staircase or whatever, but don't forget the timing!!!

I recommend submiting as neat a claim as possible. Use a spreadsheet to list the individual receipts/purchases you have made...date, name of supplier, brief description of goods, ex-VAT, VAT, VAT incl. amounts (the headings required are found at the back of the claim form posted earlier in the thread - you don't have to use the HMRC form just as long as it has the same info).

Try and have those receipts in some sort of order - date, alphabetical, doesn't matter as long as they match up with the spreadsheet so the Officer checking has very little work to do - this will speed the process up. Nothing worse than a carrier bag of receipts and a hand written scrap of paper listing what your claim is.

If you have kids, I usually recommend this is a great job for a 10yr old or teen to do, helps brush up their IT skills! Give them a cut of the refund to ensure they do it right!

If there are any invoices HMRC are unclear about they will write/call you and you can either remove the offending invoice from the claim or provide the clarity HMRC were seeking.

There are companies who will do the claim for you, usually for a percentage on success, so google "self-buidl DIY claims help" and decide if you can be bothered to do it yourself or not.

JasonLVC

leveller2911 wrote: »

I still don't see how you personally can claim back the vat...

The self-build DIY scheme does sound illogical and counter-intuitive to what we think we know about basic VAT. The logic behind the DIY scheme is that if a building firm built a new dwelling they can sell it for zero rate and get all their VAT back....but if a common man wanted to build his own house, he'd incur loads of VAT on materials and so this puts him at a dis-advanatge over the house builder....and VAT is meant to be fair.

So, to balance the unfairness, if you want to build your own new home, then the law allows you to claim the VAT back on the same basis as a proper house builder business.

The rules are exactly the same (ie, the big business house builder cannot claim back VAT on white goods, carpets or curtains either) and so in theory it means the man who wants to build his own house is in exactly the same position as the business house developer.

Both man and builder firm can claim VAT back on materials, both should not be charged VAT if they use subbies, etc.

Becuase the man is not "in business" (ie, he's not selling the house straight on for profit) then he cannot register for VAT, so in comes the self-build DIY scheme which allows him to claim VAT back from HMRC directly, without having to register for VAT.

Weird but once explained, hopefully it comes across as fair and logical.

craighewer18

Jason, you are a saint. That explanation is great and thanks for taking the time to reply.

One more question is about the zero rating of labour. Say I do go down the route of buying, for example the wood flooring (with VAT inc) and claiming it back later on via the 431NB. How do I get the carpenter to fit the flooring at the 'zero rate?. Is there any paperwork I would need to produce? If I was in the carpenters shoes I would be a bit wary of doing this, seeing as most people are unaware of the process? Also what could I do if he refuses to zero rate due to reason above?

Again thanks Jason, your explanation was awesome, great help

JasonLVC

craighewer18 wrote: »

Jason, you are a saint. That explanation is great and thanks for taking the time to reply.

One more question is about the zero rating of labour. Say I do go down the route of buying, for example the wood flooring (with VAT inc) and claiming it back later on via the 431NB. How do I get the carpenter to fit the flooring at the 'zero rate?. Is there any paperwork I would need to produce? If I was in the carpenters shoes I would be a bit wary of doing this, seeing as most people are unaware of the process? Also what could I do if he refuses to zero rate due to reason above?

Again thanks Jason, your explanation was awesome, great help

The contractor/carpenter should know what to do. For them they only have to be satisfied they are providing "labour only in reltaion to the construction of a new dwelling". Their invoice need only state "labour re. new build" and that should be sufficient for zero rating.

If they refuse to zero rate, then you need to convince them by pointing them towards the HMRC Notice 708 - see table at 3.2.1 and paragraph 3.3 http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000513&propertyType=document#P52_5462

There is no official certificate or paperwork you need issue, but often the contractor may just want reassurance for his own records, so a copy of the planning consent or site plans will prove the dwelling is new and contractor can staple that to his paperwork as proof he worked on a new build incase HMRC ever come visit him in the future. HMRC will see the plans/consent and not bother looking any further.

Failing that, you need to find another contractor who will play ball. If contractor charges you VAT for labour only, HMRC will not refund you the VAT on your DIY claim, so you end up out of pocket, so it is key to get the contractor on-side. As zero rating work is good for them (ie, they don't have to pay VAT over to VATman), it shouldn't be too hard to convince the contractor once they've seen the HMRC Notice.

leveller2911

JasonLVC wrote: »

There is no official certificate or paperwork you need issue, but often the
contractor may just want reassurance for his own records, so a copy of the
planning consent or site plans will prove the dwelling is new and contractor can
staple that to his paperwork as proof he worked on a new build incase HMRC ever
come visit him in the future. HMRC will see the plans/consent and not bother
looking any further.

Cometh the hour cometh the man..... How long have you been in Switzerland?. Bet thats a hell of a trip to the office each day.:D


I've supplied labour only zero rated for work on Listed properties (before the vat rules changed for Grade II Listed) and I just kept a copy of the letter granting planning permission for the work. As a contractor thats about all I could do as I already mentioned phoning the HMRC for advice was/is a waste of time.

craighewer18

Thanks again Jason, like leveller mentioned above, I think my problem will boil down to what exactly denotes a 'shell only' construction.

Like I said the developer is providing us with allowances for tiles/flooring/kitchen etc. Apart from the kitchen which we buy through the builder, the tiles and flooring are purchased by ourselves and then we receive a cheque from the builder for that amount. So we actually buy the flooring/tiles/bathroom fittings etc to bring the house to a "functionally complete living space" hopefully falling into the same categorie as buying a "shell only" house.

Have you ever come across a similar situation Jase?

What have I got to lose? I will stick the reclaim form in once we complete and see what happens. I either pay full whack and be done with it, or I'll receive some nice cash back at the end, hopefully the latter!

JasonLVC

Sorry for delay in responding, I travel a lot so not always in front of a computer and never got used to smartphones for posting on forums, too many typo's.

A shell building is structurally but not funtionally complete, that means it will have walls, doors, windows, roof and connected to gas/electric, etc.

But it cannot be "lived in" in the real sense becuase it lacks certain things that make living there difficult such as no kitchen fittings (no worktop), not all bathrooms installed/missing sinks/bath, etc.

If the only thing you have to do is decorating - such as putting up wallpaper and laying some carpets then you'll not be able to make a succesful claim as HMRC will take the view that you bought a completed house from the builder, not a "shell".

So only you can say whether you are just slapping some magnolia paint on the walls and a bit of lino in the utility room or whether you are finishing off a shell and installing worktops and toilets, etc.

If your claim just consists of carpet then HMRC will likely reject your claim and argue its not a shell becuase they'd expect to see more than just carpet on a claim, but then nothing ventured, nothing gained is my view.

craighewer18

No worries Jason, again thanks for the reply.

I guess im in a strange situation with regards to the builder providing us with allowances paid to us in cash. The main things we would like to claim VAT back on are the flooring and tiles.

75m2 of Oak flooring (already purchased £3000 inc VAT)
Bathroom floor and wall tiles (£800 inc VAT)
Bathroom fittings (£400 inc VAT)

If I do not buy the above (flooring/fittings etc) I presume my home would not be 'a functionally complete living space.'

[re: shell building]

" 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."

I maybe clutching at straws here but to me, that means flooring is an essential feature of a home. What you think?

Sorry to bore you to death with this Jason, your help so far has been much appreciated. Like I said, once were moved in and settled I will probably still chuck a form in and chance my arm, see what happens.

Thanks again mate

JasonLVC

its difficult without seeing plans, etc but my view remains that it is worth submitting a claim - worse case is it is rejected and your out of pocket by the VAT, best case scenario is they refund you and you've made a saving.

Certainly saniatryware and flooring would be okay. Was there any reason why you opted for a cash payment and finish off yourself? was your spec requirements too much for the builder or just a case builder wanted to get rid of property fast and so the finishing off was the sweetener in the deal?

craighewer18

No we didnt opt for the cash payment nor was it for a quick sale, as there is a waiting list for the new builds. Maybe its just the way the developer wanted to work it. We are the fourth new build on the estate and talking to the other owners, it has worked the same for them (they purchase the flooring, and the builder gave them an allowance cheque of £2000.)

It may just boil down to it being less hassle for the builder, tailoring fixtures/fittings to 70 different properties (total on estate) would be a pain in the a***.