Reduced VAT for repairs and renovations
If you are renovating an empty home, you may be eligible for reduced VAT rates. This can significantly lower the cost of refurbishment. Highland Council provides guidance to help you understand the rules and access support.
Eligibility for reduced VAT
You may qualify for reduced VAT if:
- the property has been empty for 2 years or more
- the work is carried out by a VAT-registered contractor
- the contractor provides qualifying services
- the property is a qualifying residential premises
You cannot claim reduced VAT if:
- you install materials yourself
- the property has been lived in during the last 2 years
2-year rule
If the property has been empty for 2 years or more, you may be eligible for 5% VAT on renovation work. HMRC Notice 708 will detail exactly to work out the VAT on building work and materials if you're a contractor, subcontractor or developer.
10-year rule
If the property has been empty for 10 years or more and will be used by you or your family, you may be eligible for 5% VAT during renovation or a refund of VAT after completion. Check on the UK Government's website to see if you can reclaim VAT using the DIY housebuilder Scheme.
Businesses are not eligible for the 10-year VAT refund.
Types of qualifying properties
According to HMRC Notice 708, reduced VAT rates may apply to certain types of residential buildings. These include single household dwellings, houses in multiple occupation (HMOs), buildings used for residential purposes such as care homes, and buildings located on shared sites that are also used for residential purposes.
Eligible works
Reduced VAT rates may apply to a range of construction and renovation activities. These include repairs and maintenance such as redecoration and roof repairs, improvements like extensions and the installation of double glazing, works carried out within the site including drainage, access, and security measures, as well as the construction or renovation of garages, provided they form part of the dwelling.
Ineligible works
Standard VAT rates apply to a number of goods and services commonly associated with construction and renovation projects. These include carpets and fitted bedroom furniture, scaffolding hire, landscaping works, and professional services such as those provided by architects and surveyors.
Standard vs Reduced VAT
- Standard VAT rate: 20%
- Reduced VAT rate: 5%
Example:
If renovation costs are £10,000:
- Standard VAT adds £2,000
- Reduced VAT adds £500
Saving: £1,500