In this section:
- Building and construction work and VAT
- Building trades: VAT when constructing new houses and flats
- VAT if you construct, adapt or install for disabled people
Building and construction work and VAT
Many kinds of work that builders and similar trades do are standard-rated for VAT. But certain types of work can sometimes be charged at a reduced rate of 5 per cent, or at the zero rate.
If you run a VAT-registered construction business it's important to charge the right VAT rate. You can normally only charge the reduced or the zero rate if certain conditions are met. So if you think either rate applies you should check the details to make sure.
The conditions can relate to different aspects of the work, including:
- the type of building worked on
- the type of work you do and the equipment you install
- when you do the work
- who you do the work for
Other aspects of the work can affect the VAT rate too. This guide explains when certain types of construction work can be reduced-rated or zero-rated.
On this page:
- Work on ordinary homes that may be reduced-rated or zero-rated
- Work on buildings other than ordinary homes that may be reduced-rated or zero-rated
- Installing energy-saving materials
- Installing grant-funded heating equipment and security goods
- Installing mobility aids for elderly people
- Connecting or reconnecting someone to the mains gas supply
- Customer declaration - grant-funded installations and mobility goods
Work on ordinary homes that may be reduced-rated or zero-rated
Much of the work that builders and similar trades-people do is standard-rated. But some types of work can be reduced-rated or zero-rated if certain conditions are met.
The table below lists some of the situations when construction and related work can qualify to be reduced-rated or zero-rated for VAT. In each case, specific conditions apply. The types of work, types of building and in some cases the types of customer are strictly defined. For example, the meaning of the term 'new house' may not be immediately obvious - there are some houses it wouldn't apply to. And even if the house qualifies as new, not all work done to it can be zero-rated.
You should read the further guidance notes in each case before deciding to charge the reduced rate or the zero rate.
| Type of work | VAT rate | Further guidance notes |
|---|---|---|
| Construction of a new house or flat | zero | See our guide on VAT and building new houses and flats |
| Converting a building into a house or flat | reduced rate | See VAT Notice 708, 'Buildings and construction' |
| Renovating or altering an empty house or flat | reduced rate | See VAT Notice 708, 'Buildings and construction' |
| Supplying and installing certain mobility aids for elderly people | reduced rate | See the section below on installing mobility aids for elderly people |
| Supplying and installing certain energy saving materials and equipment | reduced rate | See the section below on installing energy saving materials |
| Supplying and installing certain heating systems and security goods when funded by a grant | reduced rate | See the section below on installing grant-funded heating equipment and security goods |
| Connecting or reconnecting to the mains gas supply - first time connections and grant-funded connections or reconnections | Can sometimes be zero or reduced rate | See the section below on connecting or reconnecting someone to the mains gas supply |
| Supplying or installing goods for a disabled person in their home | zero | See our guide on construction and installation work for disabled people |
| Making alterations to suit a disabled person | zero | See our guide on construction and installation work for disabled people |
| Converting a residential building into a different residential use - for example combining two cottages into a single house | reduced rate | See VAT Notice 708, 'Buildings and construction' |
Any construction work on an ordinary house or flat that isn't listed in the table above is always standard-rated at the current standard rate. This would include, for example:
- building an extension, annex or granny annex
- converting a loft
- doing repairs or renovations
Work on buildings other than ordinary homes that may be reduced-rated or zero-rated
In some situations, construction work on buildings and sites that aren't ordinary houses or flats can be charged at the reduced rate or at the zero rate. The table below lists some of these situations. In each case, specific conditions apply. The types of work, types of building and in some cases types of customer are also strictly defined.
You should read the further guidance notes in each case before deciding to charge the reduced rate or the zero rate.
Zero-rating and reduced-rating construction work on buildings that aren't ordinary homes
| Type of work | VAT rate | Further guidance notes |
|---|---|---|
| Civil engineering work for developing a residential caravan park | zero | See VAT Notice 708, 'Buildings and construction' |
| Approved alterations to listed buildings - including houses, flats, communal residential buildings, and certain buildings used by charities | zero | See VAT Notice 708, 'Buildings and construction' |
| Converting a non-residential building into a house or communal residential building for a housing association | zero | See VAT Notice 708, 'Buildings and construction' |
| Home improvements to a private domestic property on the Isle of Man (until 31 December 2010) | reduced rate | Download the Isle of Man Government guide to VAT on home improvements |
The construction of certain other types of communal residential building may in some cases qualify for zero-rating. These can include:
- children's homes
- residential care homes
- hospices
- student accommodation
- school boarding houses
- armed forces' accommodation
- monasteries, nunneries and similar buildings
You can read more about the types of communal residential building whose construction may qualify for zero-rating - and those that can't qualify - in VAT Notice 708, 'Buildings and construction'.
The construction of certain buildings used by charities can also qualify for zero-rating if they're used only for a 'relevant charitable purpose' - see the link below.
More about zero-rating the construction of certain communal residential buildings in VAT Notice 708
Find out what counts as a relevant charitable purpose in VAT Notice 708
Installing energy-saving materials
You may be able to charge VAT at the reduced rate of 5 per cent when you supply and install certain energy-saving materials.
The reduced rate only applies to specified energy-saving materials. And it only applies when you install them in certain types of building.
Situations when the reduced rate would - and wouldn't - apply
You can charge the reduced rate of VAT on work you do to install qualifying energy-saving materials, and on the price of the materials themselves. But if you only supply the materials then you must always charge the standard rate of VAT on them.
If you have to do any minor work as part of the installation then you can charge the reduced rate on that too. This could include, for example, cutting down doors and windows or painting and plastering the area you've worked on to make good. But if installing the energy-saving materials is incidental to another job - such as building an extension or replacing a roof - then you can't charge the reduced rate on any of the work. If the standard rate of VAT applies to the main job then you'll have to charge it on the whole of the work.
Materials you can charge the reduced rate on
You can charge the reduced rate of VAT when you install the following energy-saving materials in a qualifying building:
- central heating and hot water system controls
- draught stripping
- insulation
- solar panels
- wind turbines
- water turbines
- ground-source heat pumps
- air-source heat pumps
- micro combined heat and power units
- wood-fuelled boilers
Check which energy saving materials you can zero-rate in VAT Notice 708/6
Premises where you can charge the reduced rate on an installation
You can only charge the reduced rate of VAT on qualifying energy saving materials when you install them in one of the following:
- residential accommodation
- a building used by a charity for a non-business purpose
- a building used by a charity as a village hall, community centre or similar to provide social or recreational facilities for a local community
Check what qualifies as residential accommodation in VAT Notice 708/6
Read more about VAT on energy-saving materials
Installing grant-funded heating equipment and security goods
You may be able to charge VAT at the reduced rate of 5 per cent on certain items of heating and security equipment if you install them in the homes of people who are either:
- aged 60 or over
- on benefits
These items are:
- heating appliances like boilers
- heating systems - for example central heating
- renewable-source heating systems, such as solar heating
- security goods like locks and bolts for doors and windows
You may also be able to charge the reduced rate on a connection or reconnection to the mains gas supply. See the section below on connecting someone to the mains gas supply for more information.
As long as at least part of the bill is paid for by a qualifying grant, you may be able to charge the reduced rate on the amount of the bill that's grant-funded. But you can only charge the reduced rate if all of the following apply:
- the person you do the work for is receiving a benefit that qualifies, or they're aged 60 or over
- you install the goods in their only or main home
- the goods you install are ones that the reduced rate applies to
- you install the goods and not just supply them - as long as you install the goods you can charge the reduced rate on their price as well as on the installation work
- the installation is covered by a grant made under a scheme to fund energy efficiency measures in the homes of people who are less well off
Heating appliances that can qualify for the reduced rate
The reduced rate can apply when you install:
- closed solid-fuel fire cassettes
- electric dual immersion water heaters with factory-insulated hot water tanks
- electric storage heaters
- gas-fired boilers
- gas room heaters with thermostatic controls
- oil-fired boilers
- radiators
Central heating systems
The reduced rate can apply when you install, maintain or repair:
- boilers
- radiators
- pipe work
- controls that are part of a central heating system
It applies to heating systems that also produce electricity. You can charge the reduced rate on grant-funded repairs and replacements for these items even if the original system wasn't grant-funded.
Renewable-source heating systems
The reduced rate can apply when you install, maintain or repair renewable-source heating systems. These are space or water heating systems that use energy from:
- renewable sources, including solar, wind and hydroelectric power
- near-renewable sources, including ground and air heat
Security goods
The reduced rate can apply when you install certain security goods as long as they're linked to a grant-funded installation of energy saving materials or a central heating system. The types of security goods it can apply to are:
- locks and bolts for windows
- locks, bolts and security chains for doors
- smoke alarms
- spy holes
It doesn't matter if they're installed by a different contractor to the one who installs the energy saving materials or heating system.
Benefits that qualify someone to receive the reduced rate
Someone who receives one or more of the following benefits could be eligible to be charged the reduced rate of VAT on a grant-funded installation of heating equipment, security goods or a gas connection:
- Child Tax Credit (other than the family element)
- Council Tax Benefit
- Disability Living Allowance
- Disablement Pension
- Housing Benefit
- Income-based Jobseeker's Allowance
- Income Support
- War Disablement Pension
- Working Tax Credit
Grant funding
You can only charge the reduced rate on the proportion of the bill that's covered by the grant. So if your customer only gets a grant for half of the cost, you can only charge the reduced rate on half of your bill. And if the grant covers other work as well then you can only charge the reduced rate on the work described in this section. Any other work must normally be standard-rated.
If there's a leasing arrangement in place and you sell the heating system to the leasing company, you must charge the standard rate of VAT on the sale. But you can charge the reduced rate on the installation work if you bill that directly to the householder and meet all the other conditions.
Installing mobility aids for elderly people
The reduced rate of VAT can apply if you install mobility aids for elderly people. This can be the case if you install them for someone aged 60 or over, either in their own private home or in a private home that they share with their friends or relatives. The reduced rate is currently 5 per cent.
You can only charge the reduced rate when you install mobility aids if all of the following apply:
- You install the goods and not just supply them. As long as you install the goods you can charge the reduced rate on their price as well as on the installation work. But if you only supply them, or if you just repair or replace an existing installation, you must charge the standard rate of VAT.
- You install the goods in a private home, not in a residential care home or similar establishment.
- The person who uses and benefits from the goods you install is aged 60 or over. It doesn't matter though who actually orders and pays for the work.
- The goods you install qualify for the reduced rate. Mobility aids that can be reduced-rated for VAT are listed below.
You can only charge the reduced rate on qualifying installations of the following items:
- grab rails
- ramps
- stair lifts
- bath lifts
- built-in shower seats or showers containing built-in shower seats
- walk-in baths with sealable doors
The reduced rate doesn't apply to general alterations that you might make to help elderly people, such as widening doors or building an annex.
Read the HMRC consumer guide to VAT on mobility aids for the elderly
More about VAT on installations of mobility aids for elderly people in VAT Notice 708
Connecting or reconnecting someone to the mains gas supply
Connecting or reconnecting a building to the mains gas supply is normally standard-rated for VAT. But as a concession, connecting a private dwelling to the mains gas supply (or to the mains electricity supply) for the first time can sometimes be zero-rated. This can apply to certain other buildings too.
More about zero-rating first time mains gas connections in VAT Notice 701/19
Charging the reduced rate
If you connect or reconnect someone's mains gas supply and you can't charge the zero rate of VAT, you may be able to charge the reduced rate of 5 per cent.
As long as at least part of the bill is paid for by qualifying grant, you may be able to charge the reduced rate on the amount of the bill that's grant-funded. But you can only charge the reduced rate if all of the following apply:
- the person you do the work for is receiving a benefit that qualifies, or they're aged 60 or over
- you do the work in their only or main home
- the work is covered by a grant made under a scheme to fund energy efficiency measures in the homes of people who are less well off
You can see a list of qualifying benefits and find out what types of grant are eligible in the section above on installing grant-funded heating equipment and security goods.
Installing a gas supply in a residential caravan park
If you carry out certain civil engineering works for a new residential caravan park these can be zero-rated. Civil engineering work that qualifies for zero rating in this situation includes installing mains gas, electricity and water supplies.
Customer declaration - grant-funded installations and mobility goods
If you charge the reduced rate of VAT on an installation for someone who qualifies because of their age - or because they're on benefits - then it's a good idea to get a written declaration from them for your records.
The declaration should be separate from, or at least clearly distinguishable from, any order form or invoice for the goods and services you've supplied. So a customer who signs an order shouldn't automatically be signing a declaration that they're eligible for the reduced rate.
Grant-funded installations of heating equipment, gas connections and security goods
You can only charge the reduced rate on qualifying installations you do for householders who are either aged 60 or over, or on benefits. So it's a good idea to ask them to give you a written declaration to confirm this. It should show:
- their name
- the address of their property
- a statement that they're either aged 60 or over, or that they receive one or more qualifying benefits
Mobility aids for elderly people
You can only charge the reduced rate on qualifying installations you do for people who are aged 60 or over. So it's a good idea to ask them to give you a written declaration to confirm this. It should show:
- the name of the person in the house who's aged 60 or over
- the address of the property
- a statement that they're aged 60 or over
If the person can't make a declaration personally
If the person you installed the goods for can't make the declaration personally, perhaps because they have a disability or they're unwell, then you can get one of their friends or relatives - or another responsible person - to do it for them.
