VAT calculator

Which VAT rate applies to the work, and what getting it wrong costs

This is the single largest saving available on a conversion and the one most often missed. Five per cent instead of twenty on a £250,000 job is £37,500, and it is not reclaimed afterwards: the contractor has to charge the right rate at the time, with the evidence on file. A building empty for two years, a change in the number of dwellings, and a genuine new build are three separate reliefs with three separate tests.

For: Anybody paying a builder

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The job

Cost of the work, before VAT£180,000

Labour and materials supplied by the contractor. Professional fees are standard rated whatever the works are, so keep them out of this figure.

Which case is it?

Answer these honestly rather than hopefully. Every one of them is a question of fact that HMRC can check, and the evidence has to be on the contractor's file rather than in your head.

Is it a genuinely new dwelling?

Working on a building that is already there, whatever is being done to it.

How long has it stood empty?Not empty

Two years or more brings the 5% rate. Ten years or more can be zero rated where a developer converts and sells it. You need a council empty property officer's letter or council tax records covering the whole period: your own recollection is not evidence.

Dwellings in the building now1

Zero for a shop, an office, a barn or a pub. One for a house.

Dwellings when it is finished1

If this differs from the figure above, the 5% rate applies to the conversion. A house into three flats qualifies, and so does three flats back into one house. Converting a house to an HMO does not, because it is still one dwelling.

The rate you are actually being charged

Which case applies?

An extension, a refurbishment, a loft conversion, a kitchen or a new roof on a home somebody lives in. No relief, whatever the scale of it. Evidence needed: None needed. This is the default and the contractor has to charge it.

Are you VAT registered and recovering it?

A private individual, or a landlord letting residentially. The VAT is a real cost, not a cash flow item, which is exactly why the rate matters so much.

VAT at 20% on £180,000 of work£36,000No relief applies. An extension, a loft or a refurbishment of a home somebody lives in is standard rated whatever its scale, and there is no way round it. £180,000 of work becomes £216,000.

£180,000Net cost of the work

£36,000VAT

£216,000Total to pay

£0Saved against 20%

The work83%VAT17%

What this case requires

The test20%

An extension, a refurbishment, a loft conversion, a kitchen or a new roof on a home somebody lives in. No relief, whatever the scale of it.

Evidence the contractor needs on fileBefore invoicing

None needed. This is the default and the contractor has to charge it.

Every case, on this job

A new dwelling, built from nothing — 0%£180,000

£0 of VAT, which is £36,000 less than the standard rate.

A conversion that changes the number of dwellings — 5%£189,000

£9,000 of VAT, which is £27,000 less than the standard rate.

A home empty for two years or more — 5%£189,000

£9,000 of VAT, which is £27,000 less than the standard rate.

A home empty for ten years or more — 0%£180,000

£0 of VAT, which is £36,000 less than the standard rate.

A change to the number of units in one building — 5%£189,000

£9,000 of VAT, which is £27,000 less than the standard rate.

Everything else — 20%£216,000

£36,000 of VAT. This is the one you have selected.

Total

What you actually pay£216,000

Including the VAT, which for a private individual or a residential landlord is a real cost.

Where these figures come from

Zero rated. The construction of a new dwelling, including on a site cleared to slab level by demolition. Also the conversion of a building empty for ten years or more where a developer converts and then sells it.

Five per cent. A conversion that changes the number of dwellings in a building, in either direction: a house into flats, flats back into a house, or a shop, barn, office or pub into homes. Also the renovation of a dwelling that has been empty for at least two years, evidenced by a local authority empty property confirmation or council tax records. Also the creation of a self-contained annexe or additional unit within an existing dwelling.

Standard rated. Everything else, including an extension, a loft conversion, a refurbishment, a kitchen or a new roof on a home somebody lives in, at any scale. Professional fees are standard rated in all cases.

The DIY Housebuilders Scheme lets a self-builder reclaim VAT on materials on a new dwelling or a qualifying conversion, in a single claim made within six months of completion, supported by invoices.

The single most important thing on this page: the contractor charges the correct rate at the time, with the evidence on file. A private individual or a residential landlord cannot reclaim VAT charged in error, and a contractor who has already accounted for it to HMRC may be unable or unwilling to correct it. Establish the position in writing with your accountant and your contractor before any invoice is raised. Converting a house to an HMO does not change the number of dwellings and so does not qualify for the reduced rate, however extensive the work. Residential letting is an exempt supply rather than a zero rated one, which is why landlords generally cannot recover input tax. An estimate, not tax advice: this is the calculation to take to an accountant rather than a substitute for one.

The calculators that go with this one.

Each answers a single question, on its own page, with every figure in it yours to change.

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Which VAT rate applies to the work, and what getting it wrong costs

The calculators that go with this one.

Refurb, extend or convert

Change of use

New build cost