VAT - Buildings and Construction - November 2003

There is sometimes confusion over when building work can be zero-rated or reduced-rated at 5%. You should read on if you are a contractor, sub-contractor or a developer.

A new reduced-rate of 5% was introduced with effect from 12 May 2001 for the conversion or renovation of some types of residential buildings. The construction of a new building and work to an existing building is normally standard-rated. There are, however, various exceptions to this. Briefly, they are:

• Zero Rated
  Applies to: Construction of new dwellings and communal residential buildings, and certain new buildings used by charities.
  Conversion for a housing association of a non-residential building into a dwelling or communal residential building.
  Approved alterations to listed dwellings and communal residential buildings, and certain listed buildings used by charities.
  Alterations to suit the condition of people with disabilities.
  Development of residential caravan parks.
  First time gas and electricity connections.
• Reduced Rated at 5%
  Applies to:
  Other conversions of premises to a different residential use, eg. Agricultural barn
  Renovation or alteration of some empty residential premises.
  Installation of energy saving materials; and grant funded heating system measures and qualifying security goods.
  Which VAT rate do I charge?
  Please contact us for further advice on this.

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