Can I Reclaim VAT on Building Materials for New Developments

Introduction

VAT on building materials can represent a significant cost for developers and self-builders. Fortunately, HMRC provides relief in specific circumstances, particularly when building new homes or converting properties for residential use.

The VAT you can reclaim depends on the type of project, who is carrying out the work, and whether the work qualifies for zero or reduced VAT rates. Understanding the rules before you start can save time and money.

When you can reclaim VAT on building materials

You may be able to reclaim VAT on building materials if you are:

A VAT-registered developer or contractor building or selling new residential or charitable buildings.

A self-builder constructing a new home for personal use.

A developer or landlord converting a non-residential property into residential accommodation.

The eligibility rules differ slightly between businesses and private individuals.

For VAT-registered businesses

If your business is VAT registered, you can usually reclaim input VAT on building materials and construction costs related to your taxable business activities.

In most new-build residential developments, the supply of construction services and building materials can be zero-rated, meaning no VAT is charged in the first place. However, if VAT is charged on eligible materials or professional fees, it can generally be reclaimed through your VAT return.

For self-builders and non-registered individuals

Private individuals who are not VAT registered cannot claim input VAT through a VAT return. Instead, they can apply to HMRC for a DIY Housebuilders VAT Refund under the VAT431NB (for new builds) or VAT431C (for conversions) scheme.

This scheme allows you to reclaim the VAT you paid on building materials and certain services used to construct:

A new home that you will live in.

A property built to be used as a holiday home or for residential accommodation (not for sale or rent).

A conversion of a non-residential building into a dwelling.

You must apply within six months of completion of the build or conversion.

What qualifies as building materials

HMRC defines building materials as goods that are incorporated into the building and form part of it. Examples include:

Bricks, blocks, cement, and timber.

Insulation materials.

Windows, doors, and roofing materials.

Plumbing and electrical fixtures that become part of the building.

Kitchen units, fitted furniture, and bathroom fixtures that are permanently attached.

To qualify, the materials must be supplied by a VAT-registered business and used in the construction or conversion of a qualifying building.

What does not qualify

Certain items are not considered building materials for VAT purposes, meaning you cannot reclaim VAT on them. These include:

Furniture and freestanding appliances such as fridges or washing machines.

Carpets and decorative fittings like curtains or blinds.

Tools and equipment used during the build.

Consumables such as fuel, hire charges, or safety gear.

Garden landscaping, driveways, or external structures like sheds or garages not attached to the main dwelling.

You can only claim VAT on materials directly related to the structure of the building itself.

Zero-rated and reduced-rated projects

Some construction projects attract reduced or zero rates of VAT, which can affect how you reclaim VAT.

Zero-rated: New residential buildings, including new houses or flats, are zero-rated for VAT. Builders and contractors should not charge VAT on materials or labour.

Reduced-rated (5 percent): Conversions of non-residential properties into homes or renovations of properties empty for at least two years can be charged at 5 percent VAT.

If a contractor incorrectly charges VAT on a zero-rated project, you should ask them to correct the invoice rather than reclaim the VAT from HMRC.

How to submit a VAT reclaim

If you are a VAT-registered business, you reclaim VAT on qualifying materials through your standard VAT return. Ensure you:

Retain all VAT invoices for materials and services.

Confirm that VAT was charged correctly.

Only include VAT related to taxable (not exempt) supplies.

If you are a self-builder or private individual, follow these steps for the DIY refund scheme:

Complete form VAT431NB (for new builds) or VAT431C (for conversions).

Include supporting documents such as:

Detailed invoices showing VAT paid.

Proof of planning permission and completion (such as a certificate from your local authority).

Proof that the property will be used for personal residential purposes.

Submit the claim to HMRC within six months of completion.

HMRC typically processes claims within six to eight weeks and pays refunds directly into your bank account.

Record keeping requirements

Keep detailed records of all building-related purchases and invoices, including:

Supplier details and VAT numbers.

Dates and descriptions of materials purchased.

Proof of payment (bank statements or receipts).

Planning and building control documents.

HMRC may request these documents to verify your claim, so ensure they are complete and accurate.

Businesses must retain VAT records for six years, while individuals should keep documents until their VAT refund has been processed.

Example scenario

John, a self-builder, constructs a new house for his family. He pays VAT on materials such as bricks, windows, and electrical fittings totalling £15,000. Once the project is completed, he submits a VAT431NB claim to HMRC within six months, including all original invoices and his completion certificate.

After reviewing his claim, HMRC refunds the full £15,000 because the materials qualify under the self-build scheme.

Common mistakes to avoid

Missing the six-month submission deadline.

Submitting invoices that do not show VAT or the supplier’s VAT number.

Trying to claim VAT on non-qualifying items like furniture or tools.

Forgetting to check if the contractor should have applied zero-rated VAT instead of charging it.

Conclusion

Reclaiming VAT on building materials for new developments depends on your status and the type of project. VAT-registered developers reclaim VAT through their returns, while self-builders can apply for a refund under HMRC’s DIY scheme.

Keeping accurate invoices, understanding what qualifies as building materials, and submitting your claim on time ensures you recover as much VAT as possible. If your project involves both residential and non-residential elements or complex contracts, it is worth seeking advice from an accountant or VAT specialist to ensure full compliance and maximise your refund.