Does Building Work Include VAT?
Whether VAT applies depends on the business and on the work. Here is the general position and what to check on your quote.
The short answer
It depends on the business and on the work.
A VAT-registered contractor charges VAT on most domestic building work, such as repairs, alterations and extensions to an existing home, usually at the standard rate, which is currently 20%. A business that isn't VAT-registered doesn't charge VAT at all. Some types of work can qualify for a reduced or zero rate under HMRC's rules. Whatever the case, check whether the figure on your quote includes VAT before you compare it or accept it.
This is general information, not tax advice. HMRC's guidance on GOV.UK, including VAT Notice 708 on buildings and construction, sets out the detail and is the place to check the current rates and rules.
Who charges it
Registered and unregistered businesses
Businesses must register for VAT once their taxable turnover passes a threshold set by HMRC, and some register voluntarily below it. A registered business must charge VAT on work that is subject to it. A business below the threshold that hasn't registered doesn't add VAT, which is one reason two quotes for the same work can differ.
The threshold changes from time to time, so check the current figure on GOV.UK rather than relying on a number you have heard. A quote from a VAT-registered business should show its VAT registration number, and GOV.UK provides a free service for checking that a UK VAT number is valid.
An offer to knock the VAT off for payment in cash is best declined. It usually means no proper paperwork, which leaves you without a clear record of what you paid for. See should I pay a builder in cash?
Being VAT-registered says nothing about the quality of the work, and nor does being below the threshold. It simply changes how the price is made up.
Lower rates
Work that may be charged at a lower rate
HMRC's rules allow a reduced rate or zero rate for some specific kinds of work, for example certain new homes, some conversions of buildings into homes, some installations of energy-saving materials, and some work for disabled people. Each has its own conditions, and the rules have changed over time.
Most repairs, alterations and extensions to an existing home are charged at the standard rate. If you think your project might qualify for a lower rate, ask the contractor on what basis they have charged, and read HMRC's guidance for the category concerned. Our guide to VAT on building work covers the categories in more depth.
On your quote
Three things to check
Is the price with or without VAT?
Look for "inc. VAT" or "plus VAT". If it isn't clear, ask for the total you will actually pay. Compare every quote on the same basis; see how to compare quotes fairly.
Is a VAT number shown?
If VAT is being charged, the business should be VAT-registered, and its number should appear on the quote and on the invoice.
Will you get a proper invoice?
Keep invoices and receipts for all payments. See invoices and receipts for building work.
This is general information, not tax or legal advice. VAT rates, thresholds and reliefs are set by HMRC and can change. Check GOV.UK for the current position, or ask an accountant if your project is unusual.
The paperwork
What a VAT invoice should show
If you pay a VAT-registered business, your invoice should show the business's VAT registration number and make clear how much VAT has been charged. HMRC sets out what a full VAT invoice must contain on GOV.UK.
If the business is not VAT-registered, the invoice should show no VAT at all. A business that isn't registered should not be adding VAT to its prices, so an invoice that adds VAT without a registration number is worth querying.
Keep the quote, the invoice and your payment confirmations together. They are your record of what was agreed and paid, and you may want them later for a warranty claim or when you sell the house.
If you use Mortaro
Ask us before you accept
Your quotation from us sets out the work and the price as priced by your appointed contractor. It also states whether VAT is included, which depends on whether your contractor is VAT registered. Mortaro itself is not VAT registered, so the figure you agree is the figure you pay. See how quotations work, or go back to the quotes and payments guide.
Straight answers
Questions about VAT
Why is one quote so much cheaper when VAT is added to the other?
The cheaper business may not be VAT-registered, or its price may be shown before VAT. Compare the totals you would actually pay.
Can I claim VAT back on work to my own home?
Generally not for ordinary work to an existing home. There are specific schemes, such as one for people building their own new home, with their own rules on GOV.UK.
Should a quote to a homeowner show the price including VAT?
It is clearest when it does, because that is the figure you will pay. If a quote shows prices before VAT, ask for the full total so you can compare and budget properly.
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