VAT is chargeable on most building work, although some work attracts a lower reduced rate and some is zero-VAT rated.
The standard VAT rate is currently 20%, and the reduced rate is 5%. HM Revenue & Customs provide detailed advice, but broadly speaking, qualification for the lower VAT rates can be currently summarised as:
- New dwellings
- Conversion of non-residential to housing association
- Approved alterations to listed dwellings (but not normal repair & maintenance)
- Alterations to suit conditions of people with disabilities
5% reduced rate
- Conversion of non-residential to dwelling
- Renovation of empty residential properties
- Installation of energy saving materials / qualifying security goods
- Installation of mobility aids for elderly
Often in the case of designing significant alterations to an existing building the cost-savings of retaining walls and structures safely, can equate to the demolition cost and the VAT. We have worked on several residential properties where a complex brief and requirements meant that it made economic sense to the client to pull down their existing building and start afresh. Whilst working like this cannot be said to be efficient in terms of embodied energy, any new building will far outperform the old in energy consumption over it’s life and can be designed to exactly meet the needs of the owner.
At the time of agreeing a price with a builder, they will be able to advise further on how they will apply the correct VAT rating to your building project. The above is a generalisation, and there are many facets and qualifying requirements before a lower VAT rate can be applied, further detail and advice can be found at the HM Revenue & Customs website.
(Unfortunately for our clients, architects services are specifically excluded from zero-rating.)