Can I Reclaim VAT Incorrectly Charged by My Builder?

No — not through VAT431NB. HMRC's position is that VAT charged in error on services that should have been zero-rated must be corrected by the supplier, not reclaimed via the DIY Housebuilders Scheme. If your builder has charged 20% VAT on qualifying new-build construction services, you need to ask for a corrected invoice. Simply adding the incorrectly charged VAT to your VAT431NB claim and hoping HMRC does not notice is not the right approach — and risks your claim being rejected or adjusted.

£16,000

Why this matters

A 20% VAT error on £80,000 of qualifying new-build contractor work is £16,000 of unnecessary outlay. That can only be recovered by getting the contractor to issue a corrected invoice at 0% — not by including it in a VAT431NB claim.

The key distinctions

Correct treatment — supplier corrects the invoice

Where a contractor has incorrectly charged 20% VAT on qualifying zero-rated services, they must issue a credit note for the original invoice and a new invoice at 0%. The contractor then reclaims the excess VAT they overpaid to HMRC.

Incorrect treatment — adding overcharged VAT to VAT431NB

Including incorrectly charged contractor VAT in a VAT431NB claim as if it were a reclaimable material purchase is not a valid approach. HMRC explicitly states that incorrectly charged VAT cannot be reclaimed through the DIY scheme.

Reclaimable via VAT431NB — direct material purchases at 20%

The 20% VAT on building materials you bought directly from merchants is correctly charged and fully reclaimable via VAT431NB. This is different from incorrectly charged contractor VAT.

Practical action — request correction promptly

Contact the contractor as soon as possible after identifying the error. Ask for a credit note for the original invoice and a replacement invoice at 0%. Do this while the project is active — corrections become much harder once the relationship has ended.

Practical checklist

Identify every contractor invoice where 20% VAT has been charged on qualifying new-build services
Contact each contractor in writing to request a review of the VAT rate applied
Request a credit note and corrected replacement invoice at 0% for each overcharged invoice
Do not include incorrectly charged contractor VAT in your VAT431NB claim
Keep copies of original invoices, credit notes and corrected invoices
Act before the project ends — supplier corrections become harder once contractors leave site
Materials you bought directly at 20% VAT are a separate matter — these are correctly charged and go into VAT431NB

HMRC notice references

HMRC VAT431NB guidance—Incorrectly charged VAT — supplier must adjust

HMRC Notice 708 Section 3—Zero-rating — qualifying construction services

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 distinguishes between two types of 20% VAT on a new-build project: correctly charged material VAT (your VAT431NB claim) and incorrectly charged contractor service VAT (requiring supplier correction). It generates a supplier correction schedule for any contractor invoices where the VAT rate appears wrong, alongside the VAT431NB claim for your direct purchases.

My builder charged VAT — is that correct?Can I reclaim VAT on labour?Full new build VAT guide