My Builder Charged 20% VAT on Renovation Work — Is That Correct?

It depends on what the work involves. Ordinary renovation, extension, and refurbishment of an existing occupied home is correctly charged at 20% standard rate — and there is no reclaim scheme for it. However, specific elements may attract lower rates: energy saving materials supplied and installed (currently 0% until 31 March 2027), qualifying renovation of a property empty for two or more years (5%), and certain disability adaptations (0%). If any of these apply to your project and your contractor has charged 20% across the board, that may represent an overcharge on those specific elements.

20% vs 0%

Why this matters

On a £50,000 energy saving materials element (insulation, heat pump, solar), the difference between 0% and 20% is £10,000. That rate applies at the point the invoice is issued — it cannot be corrected retroactively once the project is complete and the invoice is paid.

The key distinctions

Correctly charged at 20% — general renovation and extension

Building works to renovate or extend an occupied residential property are standard-rated at 20%. This includes structural work, fit-out, decoration, kitchen and bathroom installation.

Possibly overcharged — energy saving materials element

If your builder's quote includes supply-and-installation of qualifying ESM (insulation, heat pumps, solar panels, wind turbines, etc.), those lines should be 0% until 31 March 2027. Charging 20% on qualifying ESM lines is an overcharge.

Possibly overcharged — empty property qualifying works

If the property has been empty for 2+ years, qualifying building works should be at 5% under Notice 708 Section 8.3. A contractor charging 20% on a qualifying empty property project is overcharging.

Action needed — request itemised invoice and rate justification

Ask your contractor to itemise each line of their quote and confirm the VAT rate and basis for each element. For ESM or empty-property works, they must apply the correct rate — this is a legal obligation, not optional.

Practical checklist

Ask your contractor to itemise the quote by work type and confirm the VAT rate for each line
If the project includes ESM (insulation, heat pumps, solar), confirm those lines are at 0%
If the property has been empty 2+ years, confirm qualifying works are quoted at 5%
Do this before signing the contract — it is very difficult to correct after the invoice is issued and paid
Keep your evidence of empty period, ESM specification, or disability qualifying conditions
Note that materials you buy directly from merchants are always 20% — only contractor supply-and-install lines attract the reduced rates

HMRC notice references

HMRC Notice 708 Section 8.3—Reduced rate — renovation of dwellings empty for 2+ years

HMRC Notice 708/6—Energy saving materials — supply-and-install zero-rating

HMRC Notice 708 Section 9—Qualifying works summary

VATBuild is not affiliated with HMRC. References to HMRC publications are for informational purposes. Always consult a qualified tax adviser before making decisions about VAT on your project.

How VATBuild helps

What VATBuild checks for this situation

VATBuild checks each line item on your renovation invoices against the applicable HMRC rate rules. It identifies where a contractor has charged 20% on a line that should qualify for 0% (ESM) or 5% (empty property) and generates a supplier correction report identifying which invoices need to be reissued.

Can I reclaim VAT on renovation?Energy saving materials VAT Empty property 5% VAT rule Mixed quotation VAT analysis