My builder has quoted 20% VAT. Is that right?

Often it is. Sometimes it is not. Builders tend to quote 20% on everything because it is the safe answer for them, and some projects qualify for 5% or 0%. The only way to pay less VAT on building work is through a relief in the VAT legislation, so the real question is whether your project fits one.

Why builders default to 20%

It is rarely carelessness. The builder is the one liable for the VAT. If they charge 5% on a job that should have been 20%, they still owe HMRC the difference. Most of what a typical builder does, such as repairs, extensions and refurbishment, is correctly standard rated. And the reliefs turn on definitions, dates and planning conditions that a builder should not be expected to master.

So 20% is the cautious choice for the builder. The cost of that caution falls on you. As an example of scale only, on £200,000 of work the VAT is £40,000 at 20% and £10,000 at 5%. That is not a figure for your project.

When a lower rate can apply

In broad terms:

• New homes are zero rated. See VAT on new build homes.
• Conversions are usually 5%. That covers a non-residential building becoming homes, and work that changes the number of dwellings in a building. See VAT on conversions.
• Homes empty for two years before the work starts can be renovated at 5%.
• Energy-saving materials installed in a home are zero rated until 31 March 2027.

Fitting one of these headlines is a reason to look, not a result. Each relief has several conditions, and any one of them can defeat it.

Plenty of 20% quotes are simply right. Repairs, extensions, loft conversions and the refurbishment of an occupied home are standard rated. Alterations to listed buildings have been 20% since 1 October 2012. See extensions and refurbishment.

What people get wrong

• "I can pay at 20% and claim it back from HMRC." You cannot. VAT charged in error is not recoverable from HMRC by the customer. The only route is a credit note and a corrected invoice from the builder, which is far easier to agree before the first invoice than after a year of them.
• "The property was not empty, so it must be 20%." The empty homes rule is one relief among several. A conversion has no empty period condition.
• "The builder can do it at 5% if I ask." The rate follows from the building and the work. It is not a discount, and rewording or splitting the invoice changes nothing.
• "An unregistered builder is VAT free." They charge no VAT, but the VAT they paid on materials is in the price.

Where it goes wrong

• Whether the project really fits the relief it appears to fit, once the drawings and the planning consent are read together.
• Whether the dates and the occupation history hold up against the evidence.
• Which lines of the quote stay at 20% even when the project qualifies.
• Whether the builder has been given anything in writing they can rely on.

The sensible next step

Send us the builder's quote and we will tell you whether there is anything worth pursuing. If there is, the fee is fixed and agreed before any work starts. If the quote is correctly at 20%, we will say so, and you can price the project knowing it is right.