Before entering a property development project, you should be aware of the VAT rules. Depending on whether the property is a new build, conversion or commercial property, there will be different tax positions and differences between selling or leasing properties. You should seek professional property advice to achieve the returns you are aiming for. 

Is VAT zero-rated on new build homes?  

Building materials and labour are zero-rated for new build projects if the property meets the following criteria:  

• It is entirely new 
• It is separate, self-contained and can be sold on its own 
• It is not built for business purposes 

Since new build projects are usually zero-rated, VAT will not appear on their invoices and therefore there will be no issue regarding paying and reclaiming VAT.  

Is VAT zero-rated on conversions?  

For conversions, there will be a reduced VAT rate of 5% for materials and labour if one of the following apply: 

• A commercial property such as an office block is converted to a residential property. 
• There is a change in the number of dwellings, such as flats being converted into a single dwelling.  
• A residential building which has not been lived in for at least 10 years is being refurbished. 

How do I claim a VAT refund on building work? 

To claim a VAT refund for building projects that are VAT registered businesses, the process will be the same as receiving a refund for other business activities.  

If you are looking for a VAT refund for self-build DIY projects, you need to find the relevant HMRC form and return it to HMRC within 3 months from the project completion date.    

The information in this post is valid to the best of our knowledge on the date of posting. It is advised that you seek independent advice based on your individual circumstances. 

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