When can a construction project or construction services qualify for zero-rated VAT?

The construction of a new building is normally subject to VAT. However, zero-rate VAT may be granted if the construction is a qualifying building.

In VAT Notice 708, HMRC outlines qualifying buildings as:

  • a building ‘designed as a dwelling’
  • a building that will be used solely for a ‘relevant residential purpose’
  • a building that will be used solely for a ‘relevant charitable purpose’ (for non-business use or as a village hall - see paragraph 14.7)

A new building can only qualify for zero-rated VAT if any existing structures are demolished, excluding foundations and basements.

For more information on qualifying buildings, read section 3.2.1 of VAT Notice 708.

Zero-rated services

Any services provided can be zero-rated as long as the following conditions set by HMRC are met:

  • A qualifying building has been, is being or will be constructed.
  • Your services are made ‘in the course of the construction’ of that building.
  • Where necessary, you hold a valid certificate.
  • Your services are not specifically excluded from zero-rating.

Can I reclaim VAT on items for a new-build residential property that I intend to live in?

Yes, but this is usually only applicable to building materials. VAT would not be recoverable on items such as light bulbs, although recovery would be possible on light fittings.

If you are unsure whether your construction project is zero-rated and would like expert advice, contact our VAT team today on 0800 077 4064 to see how we can help you.

Latest Testimonials

  • "Tamara was my first port of call when I needed a VAT expert. She is extremely knowledgeable, dependable, thorough and efficient. I would recommend her personally to any business needing this kind of assistance."

    Sarah Sillars OBE, CEO at Institute of Advanced Motorists, IAM - April
  • "The VAT People have been used by Cosmo Leisure for many years. We have found them to be very thorough and professional in all that they do.
    They have looked after some very complicated tax issues for us, always meeting deadlines at short notice and pursuing successful claims."

    Keith Lee, Cosmo Leisure Group - April
  • "Tamara has advised a number of our clients on VAT-related matters and her advice has always been timely and relevant. She is also willing to discuss matters on an informal basis and could not be more helpful. I recommend her and her firm whole-heartedly."

    Adam Hymes, Commercial Property Partner at Kuit Steinart Levy LLP - April
Read All Testimonials

Useful Information


Watch Our Videos

Get the vital information you need quickly and easily by watching one of our guidance videos - topics include VAT assessments and penalties, VAT for charities, and maximising VAT recovery.

View Videos

Meet the Team

Get in Touch