My Builder Charged VAT on a New Build — Is That Correct?

Qualifying construction services on a qualifying new dwelling should normally be zero-rated (0%). If your builder has charged 20% VAT on those services, that is likely an overcharge. You cannot simply add this incorrectly charged VAT to your VAT431NB claim — HMRC states that incorrectly charged VAT must be corrected by the supplier. You need a corrected invoice from the contractor. However, not every service performed at a new-build site is automatically zero-rated, so the scope and nature of each supply must be reviewed.

£24,000

Why this matters

On a £120,000 contractor invoice for qualifying new-build construction work, incorrectly charging 20% VAT costs £24,000 unnecessarily. That cannot be reclaimed via VAT431NB — only a corrected invoice from the contractor recovers it.

The key distinctions

Correctly zero-rated — qualifying construction services

Groundworks, foundations, structural work, roofing, glazing, first fix plumbing and electrics, plastering, and other building services forming part of the construction of a qualifying new dwelling should be zero-rated by the contractor.

Overcharged — 20% VAT on zero-ratable services

Where a contractor charges 20% VAT on services that should be zero-rated, the VAT is incorrectly charged. It cannot be claimed via VAT431NB. HMRC requires the supplier to adjust the invoice.

Correctly 20% — professional fees

Architect fees, structural engineer fees, quantity surveyor fees and similar professional services are standard-rated at 20% and are not eligible for zero-rating. These cannot be included in a VAT431NB claim.

Action needed — request a corrected invoice

Ask the contractor to issue a credit note for the original invoice and a new invoice at 0%. Do this while the project is live — corrections become much harder once the contractor has left site and their account is closed.

Practical checklist

Obtain a detailed breakdown of what the contractor is supplying before querying the VAT rate
Confirm the property is a qualifying new dwelling and planning permission is in place
Ask the contractor in writing to confirm the applicable VAT rate for the qualifying construction work
If 20% has been charged on services that should be 0%, request a credit note and corrected invoice promptly
Do not add incorrectly charged contractor VAT to your VAT431NB claim
Keep copies of the original invoice, any credit note, and the corrected replacement invoice
Materials you buy directly from merchants at 20% are correctly charged — that 20% is reclaimable via VAT431NB

HMRC notice references

HMRC Notice 708 Section 3—Zero-rating — new dwellings

HMRC VAT431NB guidance—Incorrectly charged VAT — supplier correction required

VATBuild is not affiliated with HMRC. References to HMRC publications are for informational purposes. Always consult a qualified tax adviser before submitting a reclaim.

How VATBuild helps

What VATBuild checks for this situation

VATBuild checks every contractor invoice and flags any invoice where 20% VAT has been charged on services that should be zero-rated on a qualifying new-build project. It generates a supplier correction record identifying which invoices need to be reissued and calculates the financial impact of the overcharge.

Can I reclaim incorrectly charged VAT?Can I reclaim VAT on labour?Full new build VAT guide