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Zero Rate VAT Update

Following a recent tax case, HMRC have updated their guidance in relation to items which may be zero rated for VAT purposes when constructing a new residential property.

Zero rate VAT applies to the construction services and the building materials incorporated into the new residential property by the persons supplying those construction services.

The zero rate is restricted to those basic materials that make up the structure of a property, for example, bricks, mortar, timber and glass. In addition, standard fittings and fixtures that enable the property to function are also covered, for example kitchen units, work surfaces, sinks and draining boards, wash hand basins, baths, and toilets. The update now includes manual window blinds and shutters when installed in a qualifying build.

Note that you are unable to benefit from the zero rate provided for building materials if you both buy the building materials and use your own labour to incorporate those materials into your property. However, you may be able to recover the VAT charged on those materials through the DIY Housebuilder scheme.

If you have any queries on VAT and property, please contact our VAT Taxperts.

Alternatively, if you have any other questions regarding your property business, please email our EQ Property & Construction team at [email protected] or contact one of our offices.

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