VAT for most work on houses and flats by builders and similar trades, like plumbers, plasterers and carpenters, is charged at the standard rate of 20%. However, there are a number of exceptions where special VAT rules apply and a reduced or zero rate of VAT may apply.
A builder may not have to charge VAT (zero rate) on some types of work if it meets certain conditions, including:
- building a new house or flat
- work for disabled people in their home
A builder may be able to charge the reduced rate of 5% for some types of work if it meets certain conditions, including:
- installing energy saving products and certain work for people over 60
- converting a building into a house or flats or from one residential use to another
- renovating an empty house or flat
- home improvements to a domestic property on the Isle of Man
There are also special VAT rules for work on certain types of buildings that are not houses or flats, including approved alterations and substantial reconstructions to protected buildings and converting a non-residential building into a house or communal residential building for a housing association.
In addition, there are certain other types of communal residential building that builders do not have to charge VAT. These include children’s homes, residential care homes, hospices and student accommodation.
In all cases, it is the supplier’s responsibility to charge VAT correctly and to ensure they hold proper evidence to support the fact that a customer is eligible for a supply at the reduced or zero VAT rate.