- 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.
