The 5% reduced rate applies to building services carried out by a VAT-registered contractor on a qualifying conversion — turning a non-residential building into a home. It covers construction labour, materials included in a supply-and-fix contract, and some civil engineering works. It does not automatically apply to materials you buy directly, professional services, or work that extends beyond the scope of the conversion itself.
The difference between being charged at 5% (correct) and 20% (incorrect) on a £100,000 contractor invoice is £15,000 in excess VAT. That money is not recoverable from HMRC unless the contractor corrects the invoice — so spotting this rate error early is critical.
Structural work, roofing, groundworks, plumbing, electrical installation, joinery, plastering, and any other building services forming part of a qualifying conversion contract.
When a contractor supplies and installs materials as part of their overall service, the whole supply (labour and materials) is at 5%.
If you buy materials from a merchant yourself (timber, blocks, insulation, roofing materials), the merchant correctly charges 20% standard rate. You reclaim that 20% via VAT431C — it is not subject to the 5% rate.
Architect fees, structural engineer fees, surveyor fees, planning consultant fees, and similar professional services are not eligible for the 5% reduced rate — they remain at standard rate and are not reclaimable.
VATBuild is not affiliated with HMRC. References to HMRC publications are for informational purposes. Always consult a qualified tax adviser before submitting a reclaim.
VATBuild identifies the VAT rate that should apply to each line item on every invoice in your project. For conversion projects, it expects contractor service lines to show 5% and flags any that show 20% as a potential supplier error requiring correction. It also separates direct material purchases (correctly 20%, reclaimable) from professional fees (not reclaimable).