There’s no requirement to hold a certificate for zero-rated or reduced-rated supplies in connection with buildings that will be used as one of the types of dwelling described at paragraphs 14.2 to 14.5.
Zero Rating – an example would be building a new house
Reduced Rating – this applies to converting a non-residential building to a dwelling or multiple dwellings
If your builder needs further details just point them at VAT Notice 708.
Don’t accept invoices which have the wrong VAT rate on them, even if you can claim the VAT back because HMRC will only accept the recovery of VAT when its charged at the correct rate
When do you need a Certificate?
You need to hold, within your business records, a valid certificate when you make any zero-rated:
Possession of a valid certificate does not mean that you can automatically zero rate or reduce rate your charge. The certificate merely confirms that the building is intended to be used solely for a qualifying purpose. You must meet all of the conditions explained in the relevant sections of notice 708 to zero rate or reduce rate your supply.
The customer for the zero-rated or reduced-rated work issues the certificate. The certificates at section 18 of VAT Notice 708 can be used, or the issuer can create their own certificate provided it contains the same information and declaration.
The 2 available certificates confirm that you’re either eligible to receive:
What if you get it wrong?
If you issue an incorrect certificate, you may be liable to a penalty equivalent to the amount of VAT not charged. A penalty is not VAT and, if you’re registered for VAT, you will not be able to recover it as input tax.
A penalty will not be issued, or will be withdrawn, if you can demonstrate that there’s a reasonable excuse for issuing the incorrect certificate.
What if the use changes?
If you have obtained zero rating for the construction or acquisition of a building (or part of a building) because you certified that it would be used solely for a ‘relevant residential purpose’ or a ‘relevant charitable purpose’, HMRC expect that the building will be used solely for either or both of those qualifying purposes for a period of, at least, 10 years following completion of the building.
If the building ceases to used solely for either or both of those qualifying purposes within that 10-year period, if that use decreases or if the building is disposed of, a taxable charge comes about, on which you must account for VAT.
What about Materials?
Retailers and builders merchants charge VAT at the standard rate on most items they sell.
Builders charge VAT on ‘building materials’ that they supply and incorporate in a building (or its site) at the same rate as for their work. Therefore, if their work is zero-rated or reduced-rated, then so are the ‘building materials’. But some items are not ‘building materials’ and remain standard-rated.
Progressive Property Approved Accountant, Business Expert and Trainer/Speaker with Redcliffe Training, MBL Seminars and UK Training ►MD ► Bicknell Business Advisers ✸ family business providing accountancy, tax, and consultancy services to SME's and Start Ups - Xero, Sage One, QuickBooks, Freeagent, Kashflow, Hammock, Dext - Receipt Bank ✸ www.bicknells.net www.stevejbicknell.com View all posts by Steve Bicknell
Published May 8, 2021
Bicknell Business Advisers Limited40 Broadway Lane, Bournemouth
I have known Steve for a couple of years and he has always been very helpful. He is pro-active and very knowledgeable. His advice is certainly top and I completely recommend him
As is often the case, the most valuable business relationships are generated by word of mouth. Working as a Director of the Southern Electric Traction Group C.I.C in London, Bicknell Business Advisers Limited were recommended to me by a … More fellow business owner. I am truly grateful for that recommendation. I can honestly say that the guidance and support we have received from the team have been instrumental to our work and we would be in a considerably lesser position without them.
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I would recommend Steve 100% to anyone! He's the best advisor and tax professional I've found in many years. As a Spanish citizen, he has helped me a lot not only become very efficient with my taxes but also understand how the … More UK Tax system works!
He is friendly, professional and delivers a lot of value to the people he works with.
Steve and his team have been an invaluable asset to Squirrel as of day 1. They never cease to hit the mark when it comes to our accounting, payroll and R&D-related needs. The depth of knowledge and expertise to address the challenges … More of running a small business on the path to becoming a growing concern has exceeded expectations. The team is extremely approachable and willing to drill into the details with myself and members of my team at every opportunity.
I have known Steve Bicknell for around 20 years and have always found
him to be an extremely knowledgeable professional, with a down to earth
approach - always able to explain technical info in a way that is easy to understand.
I always … More recommend him to friends and business acquaintances and will continue to do so, as a person of integrity and professionalism.
