VAT on Construction Works: What Rate Applies to Your Project?

VAT on construction work is not straightforward. Depending on the type of property, the nature of the works, and whether the property is being used for residential or commercial purposes, VAT may be charged at 20%, 5%, or 0%. Getting this right affects your budget significantly.

Standard Rate (20%)

The standard VAT rate of 20% applies to most construction services on existing residential properties, including:

• Extensions and loft conversions
• Refurbishments and renovations
• Repairs and maintenance
• New kitchen or bathroom installation

If you are a private homeowner commissioning works on your own home, the standard rate of 20% applies in most cases.

Reduced Rate (5%)

The reduced rate of 5% applies to certain construction services, including:

• Renovating a property that has been empty for more than 2 years: Works to bring an empty residential property back into use are eligible for the 5% rate.
• Renovating a property that has been non-residential and is being converted to residential: For example, converting a commercial building to flats.
• Converting a residential property to a different number of dwellings: For example, converting a house into flats, or flats back into a single house. The conversion element of works qualifies for 5%.
• Certain energy-saving materials: Installation of qualifying insulation, solar panels, heat pumps, and other energy-saving materials under specified schemes may qualify for the reduced rate.

Zero Rate (0%)

The zero rate of 0% applies to:

• New build residential construction: Building a new residential dwelling from scratch (not conversion of an existing building)
• Charitable construction: New buildings constructed for charitable purposes
• Certain disabled adaptations: Specifically listed mobility aids and adaptations for disabled persons

Practical Implications

For most London extension, loft conversion, and refurbishment projects on occupied residential properties, VAT at 20% is the rate your contractor will charge. Your invoice will show the net contract sum plus 20% VAT.

If your project qualifies for the reduced or zero rate, ensure your contractor applies the correct rate and that you have documentary evidence of the qualifying conditions (empty property statutory declaration, conversion evidence, etc.).

RCB Design & Build

RCB Design & Build applies the correct VAT rate to all works based on the property type and scope. We include VAT at the appropriate rate in all proposals and invoices.