VAT & Construction Glossary

A self-contained unit of accommodation built onto or alongside an existing property. For an annexe to qualify as a 'new dwelling' under HMRC Notice 708 section 4 — and therefore attract zero-rated construction services — it must: (1) have its own separate entrance usable without passing through the main building (an internal connecting door is additionally allowed); (2) have its own kitchen; (3) have its own bathroom; and (4) be capable of being sold or let separately from the main property. An extension that lacks any of these four features does not count as an annexe for VAT purposes.

The statutory service — provided by the local authority or a private Approved Inspector — that checks building work complies with the Building Regulations. For a new build or major conversion you must either submit a Full Plans application (approved before work starts) or submit a Building Notice (work can start immediately but is inspected at stages). Building Control is separate from planning permission: planning controls whether you can build; Building Control controls how you build. The Building Control Completion Certificate — issued after a final inspection — is the legal document that starts the 6-month window to submit a VAT431NB or VAT431C claim to HMRC.

An official certificate issued by Building Control (either the local authority or an Approved Inspector) after a final inspection confirms that building work complies with the Building Regulations. For self-builders using VAT431NB or VAT431C, the date printed on this certificate is the legal start of the 6-month window to submit your VAT reclaim to HMRC — not the date you upload or receive it.

Works that alter how many separate dwellings exist within a building — for example, converting a single house into two or more flats, merging flats into one home, or constructing an annexe that creates an additional self-contained dwelling. Under HMRC Notice 708 section 7, a genuine increase or decrease in the number of dwellings may qualify for the 5% reduced rate of VAT on contractor services, which self-builders can reclaim via form VAT431C.

A HMRC scheme that requires contractors to deduct money from subcontractor payments and pass it to HMRC as an advance payment towards the subcontractor's tax and National Insurance. CIS applies to most construction work carried out in the UK. The Domestic Reverse Charge for VAT purposes is linked to CIS — DRC applies when both the supplier and customer are VAT-registered and the supply falls within the scope of CIS.

A notice from the Valuation Office Agency (VOA) confirming that a newly constructed property has been added to the council tax register and assigned a banding. HMRC treats receipt of this notice as confirmation that the property is a separate, self-contained dwelling. It is required supporting evidence for a VAT431NB claim.

The complete removal of all above-ground structures on a site, leaving only the foundations or cleared ground. HMRC requires demolition to ground level as a condition for treating a project as a 'new build' for VAT purposes. If any substantial external walls remain standing — even if the interior is entirely gutted — HMRC may reclassify the project as a conversion rather than a new build, which changes both the VAT rate applied by contractors and the claim form used (VAT431C instead of VAT431NB). Exception: where retention of the façade or shell is specifically required by a planning condition or listed building consent, HMRC may still allow new-build VAT treatment — seek specialist advice in this case.

A contractor who takes responsibility for both the design and construction of a project under a single contract. For a new qualifying dwelling, all elements — materials, labour, design, and management — are generally zero-rated as part of the single supply of construction. Non-incorporated items (carpets, curtains, free-standing appliances) remain standard-rated.

A delivery method where the self-builder contracts individual tradespeople directly rather than through a main contractor. The self-builder coordinates all trades themselves. Labour services are generally standard-rated, but materials purchased by the self-builder directly may be reclaimable through VAT 431NB.

Works specifically designed and installed for a disabled person — such as ramps, accessible bathrooms, stair lifts, widened doorways, or adapted kitchens — can qualify for the zero rate of VAT under HMRC Notice 701/7 (VAT relief for disabled people), regardless of whether the property is new or existing. To qualify, the works must be for the personal or domestic use of a disabled person, and the disabled person must typically reside at the property. This is a completely separate relief from the DIY Housebuilders' Scheme (VAT431NB/431C) and can apply alongside it.

An HMRC scheme allowing private individuals to reclaim VAT paid on building materials when constructing or converting their own home. Claims are made using form VAT431NB (new build) or VAT431C (conversion) within six months of the building being completed. The scheme effectively puts self-builders in a similar position to a VAT-registered contractor.

A VAT accounting rule that applies to certain construction services supplied between VAT-registered businesses. Under DRC, the customer (not the supplier) accounts for the VAT on the supply — the supplier's invoice shows no VAT amount and instead states 'Reverse charge: customer to account for VAT'. DRC does not apply where the customer is an end user, such as a self-builder who is not VAT-registered for construction purposes. If a contractor incorrectly applies DRC to a self-builder's invoice, a corrected invoice showing the proper VAT rate is needed. VATBuild flags invoices where DRC appears to have been applied incorrectly.

A residential property that has been unoccupied for between 2 and 10 continuous years may qualify for the 5% reduced rate of VAT on renovation works under HMRC Notice 708, section 8. Unlike the VAT 431C scheme (used for properties empty 10+ years), this is not an after-the-fact reclaim — the 5% rate is applied directly by the contractor on their invoices. The owner must retain evidence of the vacancy period (such as council tax records, a local authority empty property register entry, or utility disconnection records) available on request.

Goods and installation services qualifying for the 5% reduced VAT rate under HMRC Notice 708/6. Qualifying items include insulation, solar panels, wind turbines, heat pumps (air source, ground source), biomass boilers, MVHR heat-recovery ventilation, draught-stripping, and hot-water tank insulation. The reduced rate applies when the materials are supplied and installed together in a residential property. Materials-only supply without installation remains standard-rated at 20%.

Keeping the external walls (façades) of an existing building while demolishing and rebuilding the interior. HMRC's general position is that if substantial external walls are retained, the project may be treated as a renovation or change of use rather than a qualifying conversion — which would remove eligibility for the 5% reduced rate (and the VAT431C reclaim). Exception: where a planning condition or listed building consent specifically requires the façades to be retained, HMRC may still allow conversion treatment. This is a high-stakes question: if you are retaining walls, confirm your planning position with a VAT specialist before works begin.

HMRC Notice 701/7 sets out the conditions under which VAT relief (zero or reduced rate) can be applied to goods and services for disabled people. For construction works, it covers adaptations to a dwelling specifically designed and installed for a disabled person — such as ramps, accessible bathrooms, stair lifts, widened doorways, or adapted kitchens. To qualify, the works must be for the personal or domestic use of a disabled person who resides at the property. Contractors need a signed certificate from the disabled person (or their representative) confirming eligibility before they can apply the zero rate. Without this certificate contractors are required to charge the standard 20% rate, even for otherwise qualifying works.

The primary HMRC guidance document explaining VAT rules for construction, conversion, and renovation of buildings in the UK. It covers when construction services and materials are zero-rated, reduced-rated, standard-rated, or exempt. VATBuild is based on the rules in this notice.

Building materials that are physically built into or fixed to the structure of a building and cannot easily be removed without significant damage. Examples include bricks, roof tiles, fitted kitchen units, sanitaryware, and electrical wiring. VAT on incorporated materials is generally reclaimable under the DIY Housebuilders' Scheme.

VAT charged on goods and services purchased by a business in the course of making taxable supplies. VAT-registered businesses can reclaim input tax by offsetting it against the VAT they charge on their own sales (output tax). Self-builders reclaim input tax on materials via the DIY Housebuilders' Scheme rather than through a VAT return.

A standard form construction contract produced by the Joint Contracts Tribunal. JCT contracts are widely used in UK construction and set out the legal obligations of the employer (client) and contractor. Where a project manager or contractor works under a JCT contract, it helps evidence that qualifying construction services are being supplied rather than consultancy.

Soft landscaping (plants, turf, shrubs, topsoil spreading) and hard landscaping (paths, driveways, patios, retaining walls) are both normally standard-rated at 20% and not reclaimable under the DIY Housebuilders' Scheme — even on a new build. Exception: where landscaping is specifically required as a mandatory planning condition on a qualifying new build or conversion — not merely recommended or aspirational — it may be treated as part of the qualifying construction works and attract the zero rate or reduced rate. Evidence of the planning condition (the planning decision notice) is needed. VATBuild asks about this in the Clarify step and flags landscaping line items in your invoices for confirmation.

A residential property that has been unoccupied for a continuous period of 2 or more years. Under HMRC Notice 708, renovation works carried out on a long-term empty property may qualify for the 5% reduced rate of VAT. To benefit, the owner must be able to demonstrate the vacancy period with supporting evidence. Acceptable evidence includes: council tax records showing the property was unoccupied; a local authority empty property register entry; correspondence from a letting agent or estate agent confirming the property was vacant; utility disconnection or reconnection records; or an empty property certificate issued by the local authority. The evidence does not need to be submitted with a VAT claim but must be retained and available on request.

A single construction company engaged to deliver the entire building project. The main contractor takes responsibility for all works, employs or subcontracts specialist trades, and presents a single contract and invoice to the client. Qualifying construction services supplied by a main contractor for a new dwelling are zero-rated.

Items purchased for a new home that are not permanently built into the structure. Examples include carpets, curtains, free-standing appliances, furniture, and loose-fit kitchen appliances. VAT on non-incorporated materials cannot be reclaimed under the DIY Housebuilders' Scheme.

Converting a building previously used for a non-residential purpose — such as a barn, office, shop, pub, or church — into one or more homes. Under HMRC Notice 708 section 7, qualifying contractor services for this type of conversion are reduced-rated at 5%. Self-builders can reclaim this 5% VAT, plus VAT on materials they purchased directly, by submitting form VAT431C (DIY Housebuilders' Scheme — Conversion) within six months of their building regulations completion certificate date. The building must not have been used as a dwelling at any point in the 10 years before works began.

A choice available to landowners and property developers to charge VAT at the standard rate (20%) on the sale or rental of land and commercial property that would otherwise be VAT-exempt. Once an option to tax is made, it affects all future supplies of that land or building. For construction projects, an option to tax can affect whether input tax on construction costs is recoverable. The option must be notified to HMRC within 30 days of being made.

VAT charged by a business on the goods or services it sells. Output tax is declared on the business's VAT return and paid to HMRC, less any reclaimable input tax.

A VAT situation where a business makes both taxable and exempt supplies. Only the VAT relating to taxable supplies can be reclaimed. For construction projects that include both qualifying and non-qualifying use, partial exemption rules may limit the amount of VAT recoverable.

Formal consent from a local planning authority to carry out development work. For a new dwelling, planning permission is a prerequisite for the building being treated as a qualifying new dwelling for VAT purposes. Evidence of planning permission is required when submitting a VAT 431NB claim.

The point at which a building is complete and ready for use, even if minor snagging items remain. Practical completion is usually certified by the architect or contract administrator and triggers the start of the defects liability period. For VAT 431NB purposes, the six-month claim window runs from the date of practical completion (or equivalent, such as the building regulations completion certificate date).

Fees for professional and consultancy services are standard-rated at 20% and cannot be reclaimed under the DIY Housebuilders' Scheme (VAT431NB or VAT431C), even when they are directly related to your build. This includes fees for architects, structural and civil engineers, quantity surveyors, planning consultants, project managers acting as your agent (not as a contractor), acoustic consultants, and solicitors. Only the physical construction works, and materials you purchase and incorporate, are potentially reclaimable. If your project manager holds the construction contract in their own name (acting as a contractor rather than as your agent), their fees may be zero-rated as qualifying construction services — see the glossary entry for 'Project Manager acting as Contractor'.

A professional engaged to manage the construction process on behalf of the client. The VAT treatment depends on the nature of their appointment: if employed by the client as an agent coordinating direct labour, their management fee is generally standard-rated. If they hold the construction contract and supply qualifying construction services as a contractor, their services may be zero-rated.

A project manager who holds the construction contract in their own name and takes legal responsibility for delivery of the works. In this arrangement, qualifying construction services are generally zero-rated. Management, design, and technical services may also follow the zero-rate treatment where they are genuinely supplied as part of a qualifying construction contract (ideally a standard form such as JCT). Independent consultancy services remain standard-rated.

Construction services supplied in connection with the construction of a new dwelling that qualify for the zero rate of VAT. This includes building work such as groundworks, structural work, roofing, plumbing, and plastering. It excludes professional services such as architectural design, project management, and surveying when provided independently.

A VAT rate of 5%, applied to certain specific supplies such as energy-saving materials and the conversion of non-residential buildings into dwellings. Lower than the standard rate of 20% but higher than the zero rate.

A private individual who directly manages or undertakes the construction of their own home, rather than buying a completed property from a developer. Self-builders can reclaim VAT on materials through the DIY Housebuilders' Scheme (VAT 431NB) but cannot reclaim VAT on labour services.

A unit of accommodation that can be occupied as a separate home independently of any other property. Under HMRC Notice 708, a self-contained dwelling must: (1) have its own kitchen; (2) have its own bathroom; (3) have its own separate entrance that does not require passing through another dwelling (an internal connecting door to an adjoining property, such as in an annexe, does not disqualify it provided a self-contained entrance also exists); and (4) be capable of being sold or let separately from the existing property. All four conditions must be met for construction to qualify for zero-rating or a VAT431 claim.

A project where the self-builder takes full responsibility for managing all trades, procurement, and coordination without appointing a professional project manager or main contractor. The self-builder contracts each trade directly. Labour costs are typically standard-rated but materials purchased by the self-builder can be reclaimed through VAT 431NB.

The normal UK VAT rate, currently 20%. Goods and services not specifically zero-rated, reduced-rated, or exempt are standard-rated. Professional fees such as architects, structural engineers, and independent project management consultants are typically standard-rated.

A business or individual engaged by a main contractor (rather than directly by the client) to carry out a specific element of construction work. Subcontractors are typically specialist trades such as groundworkers, steel fixers, roofers, or M&E installers. The VAT treatment of a subcontractor's invoice follows the same rules as a main contractor invoice — qualifying construction services for a new build should be zero-rated, and for a conversion reduced-rated at 5%. Domestic Reverse Charge rules may also apply in CIS arrangements between VAT-registered businesses.

A document issued by a VAT-registered supplier to correct or cancel a previous invoice. In construction VAT claims, a credit note is typically required when a supplier has charged the wrong VAT rate — for example, charging 20% on services that should be zero-rated for a new build. The supplier issues a credit note reversing the original invoice and then reissues a corrected invoice at the correct rate.

When a contractor supplies materials AND installs them as a single, combined supply under one contract, the whole invoice — including the materials element — is treated as a construction service for VAT purposes. This means: for a qualifying new build, the entire supply and install invoice should be zero-rated, not split into 0% labour and 20% materials; for a qualifying conversion, the invoice should be reduced-rated at 5%; if the contractor has charged 20% on materials on a supply-and-install invoice for a qualifying project, a supplier correction may be needed. VATBuild detects supply-and-install situations in your invoices and asks you to confirm before applying the correct rate.

The conversion equivalent of VAT 431NB. Allows individuals converting a non-residential building into a home to reclaim VAT on materials. The applicable VAT rate for conversions is the reduced rate (5%), not zero.

An HMRC scheme that allows individuals who build their own home to reclaim VAT on building materials they purchase directly. It applies where the building work itself would be zero-rated if carried out by a VAT-registered contractor. The claim is a one-off submission made after the building is complete.

A supply that is outside the scope of VAT entirely, meaning no VAT is charged and — unlike zero-rated supplies — the supplier cannot reclaim input tax on costs related to that exempt supply. In construction, certain land transactions and the sale of older residential buildings can be exempt. Exempt supplies do not count towards VAT-reclaimable construction costs.

A document issued by a VAT-registered supplier showing the supply date, supplier's VAT number, description of goods or services, net amount, VAT rate, and VAT amount. A valid VAT invoice is required to support a VAT reclaim, including claims under the DIY Housebuilders' Scheme.

A VAT rate of 0% applied to certain goods and services. The supply is still technically subject to VAT, which means VAT-registered businesses can reclaim VAT on their costs — unlike exempt supplies. For new dwellings, most construction services and building materials are zero-rated.

A signed customer declaration that authorises a VAT-registered contractor to apply the zero rate of VAT to qualifying construction services for a new dwelling. The self-builder (as customer) signs the certificate to confirm the building is a new qualifying dwelling. Without this certificate, the contractor should default to charging the standard 20% rate. One certificate can be reused across multiple contractor packs.