Reclaim VAT from HMRC for a DIY Scheme

Posted 13/09/2019

For most sole traders, partnerships or limited companies VAT can only be reclaimed on expenses if that trade is registered for VAT and if the expenses they purchased had a VAT element paid on them. If an individual is constructing as a DIY homebuilder but is not working within the construction industry, and is working on a new build or conversion for family use the VAT on building materials can be reclaimed, provided there are no business purposes involved. Below are the requirements for that individual to meet in order to do this.

Building materials are items that are integrated into the building from which they cannot be removed without the use of a tool or without damaging the building. Fixed furniture and accessories, such as bathroom cabinets and carpets are not included as they are not a required part of the building, and the cabinets can be easily removed from their fixtures. Usually, for new builds, builders and subcontractors do not charge VAT on their labour costs so there will be no VAT to reclaim here. Additionally, professional fees, hire of equipment and/or machinery and zero-rated items cannot be claimed for.

HMRC do have a list on their website if there are uncertainties around specific items.

When considering the expense, the consideration of removing the items should be looked at. An electrical fitting into a wall can be stopped by disconnecting the electricity, a bedroom mirror can be unscrewed from the wall and brought down, and curtain rails are removeable to allow for easy changing of curtains. This makes these items not building materials. Wooden flooring would be a building material as it serves as a foundation for use within the building and removing this would prevent people walking within the building safely.

To be eligible, there are different requirements for new builds, conversions, or a communal or charitable building project.
1. A new build must be a separate and self-contained building for family use, either to live in or for holidays, and must not be intended for business use. A room in the building may be classed as the work office for the home.
2. A conversion on a non-residential building is eligible, or if the building has not been occupied for at least ten years.
3. If the building is for charitable (i.e. a hospice) or a communal residential (i.e. children’s home) then the work must be for non-business purposes.

An application must be made to HMRC to reclaim VAT within three months of the completion date; for a new build the form 431NB must be completed, and a 431C for a conversion. The completed form should be sent along with documents to back up the VAT claim and post this package to HMRC as per their website. If any purchases have been made in a business’ name, the bank statement showing the repayment from a personal account to the business should also be included.

Tags: VAT, DIY Scheme, Not VAT Registered, HMRC