You may not have to charge VAT on labour or building materials for work you do on a new house or flat.
What counts as new
For work to be zero-rated for VAT, it must qualify as a genuinely new, self-contained house or flat. This means:
- it’s self-contained - there aren’t any internal doors or connections to other houses or flats
- it can be used independently of any other property, including businesses
- it can be sold on its own
- it has proper planning permission
- any existing buildings on the site have been demolished completely to ground level (unless you’re extending an existing building to create a new house or flat)
A ‘granny flat’ or annexe you’re building as an addition to an existing house can’t be used or sold separately to the main house. This means you must charge VAT at the standard rate of 20%.
For mixed-use buildings, like a shop with a flat above it, only the work on the residential part can be zero-rated for VAT.
Find out more about qualifying buildings for zero-rated VAT.
Timing, labour and materials
Work that’s zero-rated for VAT must take place during the construction project, or be closely related to it (eg demolishing existing buildings and preparing the site). This is known as work done in the course of construction.
You can’t zero-rate work you do after a building’s finished, apart from correcting defects in the original work (‘snagging’).
All labour on a qualifying building can be zero-rated, but there are special rules on what counts as building materials for VAT purposes.