VAT Planning for New Builds: Strategies to Minimize Costs and Maximize Recovery

• Construction of a new house and materials used are zero-rated for VAT
• Architect and other building professional fees are standard rated
• VAT cost affects individuals, entities renting houses, housing associations, non-business entities, entities using buildings for exempt purposes, entities not selling houses, and entities unable to recover input tax
• Advisers should consider ways to remove VAT charge for cashflow purposes
• Housebuilder can create a VAT registered design and build company (newco)
• Newco purchases professional and construction services, incurring VAT
• Supplies are bundled into zero-rated design and build services to housebuilder
• Newco recovers input tax on professional fees as it relates to taxable supply
• Newco is in a repayment position and receives VAT refund from HMRC
• Independent design and build company or contractor can achieve similar results
• Proper implementation requires appropriate contracts, invoicing, and arm’s length arrangements
• Newco should act as principal, not agent, and not be in the same VAT group as housebuilder
• Loans should be handled carefully to maintain commercial integrity
• HMRC guidance states zero-rating applies to construction but excludes certain services

Source: marcusward.co

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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