Rates at a glance
| Work or supply | Rate |
|---|---|
| Construction of a new building for a relevant residential purpose, with a certificate | 0% |
| Construction of a new building for a relevant charitable purpose, with a certificate | 0% |
| Building materials supplied and fitted by the main contractor | 0% |
| Converting a building into a care home or other relevant residential use, with a certificate | 5% |
| Subcontractors' work on a building that needs a certificate | 20% |
| Carpets, appliances, furniture and professional fees | 20% |
The rate for your project depends on its facts. Each line of a quote is rated on its own.
Does yours qualify?
The headline tests. All of them have to hold.
- The building is for a relevant residential purpose, such as a care home, children's home, hospice or student living accommodation, or for a relevant charitable purpose.
- The work is the construction of a new building for 0%, or the conversion of a building into relevant residential use for 5%.
- The customer gives the contractor a certificate before the work is supplied.
Plus 3 further points we test. These are the ones that are easy to miss, and any one of them can change the answer. A qualification report works through every one against your documents.
About the qualification reportWhere projects go wrong
- A late certificate. It has to be in the contractor's hands before the supply, not produced when the final account is argued over.
- Buildings that look similar but are outside the definition. Hospitals, prisons and hotels are not relevant residential buildings.
We check for 4 more pitfalls on every project of this kind. Most only come to light once the work has been invoiced, which is the expensive time to find them.
What it can be worth
A new 24-bed residential care home
A care operator receives a main contractor's tender of £3,150,000 before VAT for a new residential care home. The operator will give a certificate before work starts.
| Item | Net | Rate | VAT |
|---|---|---|---|
| Substructure, frame and envelope | £1,420,000 | 0% | £0 |
| Roofing, windows and doors | £385,000 | 0% | £0 |
| Mechanical and electrical installations | £610,000 | 0% | £0 |
| Internal fit-out, bathrooms and finishes | £420,000 | 0% | £0 |
| External works, drainage and parking | £165,000 | 0% | £0 |
| Catering and laundry appliances | £68,000 | 20% | £13,600 |
| Bedroom and lounge furniture | £52,000 | 20% | £10,400 |
| Carpets | £30,000 | 20% | £6,000 |
| Total | £3,150,000 | £30,000 |
- VAT if quoted at 20% throughout
- £630,000
- VAT rated line by line
- £30,000
- Difference
- £600,000
An example to show how the rates fall on the main contractor's supply for a certificated building. It is not a figure for your project.
How we help with care homes, student accommodation and charity buildings
We establish whether the intended use of your building meets the tests for the zero or reduced rate, and whether the contract is set up so the relief reaches the right supply. You get a clear answer on whether the project qualifies, with the reasoning written down before anyone signs a certificate. If part of the scheme is correctly 20%, the answer says which part.
A line-by-line analysis then sets out the right rate for every part of the tender, with a letter for the contractor. The earlier we see the scheme, the easier it is to put right anything that would cost you the relief. There is more for tendering firms on our page for contractors. To start, send us your quote.
Questions
Is a new build care home zero rated for VAT?
It can be. The construction of a new building intended solely for a relevant residential purpose, which includes a care home, is zero rated where the customer gives the contractor a certificate before the supply. The zero rate covers the main contractor's work and the building materials they supply and fit, and subcontractors charge 20%.
What is a relevant charitable purpose?
It means use by a charity otherwise than in the course of a business, or use as a village hall or similar. The building has to be used solely in that way. A charity that will use the building for business activities needs to look at this carefully before giving a certificate.
Is there VAT on building student accommodation?
New student living accommodation is one of the uses within a relevant residential purpose, so its construction can be zero rated with a certificate. The building has to be used solely for that purpose. Converting an existing building into student living accommodation can be 5%, also with a certificate.
Based on the Value Added Tax Act 1994 and HMRC's published guidance. This page explains how the rules work in general. It is not advice on your project, and no rate applies until the facts have been analysed.
