VAT on construction and building projects is a contentious issue!
I am currently managing a construction project with three levels of VAT associated with it – 20%, 5% and zero%.
Now, of course, the industry (and homeowners) would say that more works would be carried out, to the betterment of the economy generally, if all refurbishment works carried a lower VAT threshold than 20%. Not many would disagree with that.
However, there are circumstances where one can minimise the amount of VAT being paid.
1. On New Builds
New build construction is zero rated.
A cost benefit analysis would need to be made as to whether to keep an old construction (or part of it), or opting for total demolition. A good case should be made at the Planning stage.
For retention of structures, there are rules as to how many retained walls to a building constitute necessary ‘façade retention’ enabling one to also construct at a zero rate of VAT.
2. On Empty Buildings
An empty building for 2 years prior to construction can also give one the option of reducing the VAT rate down to 5%.
I recently went to my godson’s 18th birthday party where a family friend has completed a refurbishment project without claiming this rate. On a build budget of £300,000 he would have saved £45,000!
This is far more than paying for a Project Management company to oversee the works (who themselves went over budget through errors made and took far longer than if a Project Manager had been driving the project).
3. Charitable and Disability linked Projects
The other area attracting a zero VAT rate is associated with charitable or disability linked projects.
Certain goods apply but so do some associated services. It’s not all black and white and a case with HMRC can be made to include some construction associated with zero-rateable goods. Language too is important. For example, a pool is not a ‘swimming pool’ (not eligible) but a ‘hydrotherapy pool’ (which is) if associated with the disability in question and a need is made.
It’s important that these links are made in construction when it comes to VAT savings and that the owners of the building are aware of the savings that can be made. We take this into consideration when project managing a build for clients and ensure that we explore the possibilities with you.
If you’d like to know more about how we work or just to chat to one of our project managers, get in touch by commenting in the box below or find us on Twitter.
