This is an area of VAT that I have been asked about quite often recently. Its a complex area and HMRC explain that 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.
If you are involved in building and construction you should firstly check HMRC’s website and familiarise yourself with the regulations. Getting this wrong can be very costly!
Tax Barrister, Accountant