Please note that this article only serves as a guide to the VAT situation regarding radiators. This is not a government publication and the rules and regulations are changed frequently.
Not surprisingly, homebuilders and renovators are always willing to keep costs down on any project, but this doesn’t mean just sourcing materials. It can also help identify any opportunities to reduce your potential VAT bill.
Value Added Tax or VAT is a tax levied in the UK on all non-essential items. When building or renovating a home, there are a number of conditions under which you can get a VAT exemption on your radiators or claim a refund from the Tax Collector, also known as Her Majesty’s Revenue and Customs.
VAT on your radiators can be zero-rated or refunded if:
1. The radiators must go in a new construction or new extension;
2. The radiators are part of a conversion or renovation; Prayed
3. The radiators are for a listed property.
However, taxes are a complicated subject and this issue can be a potential minefield. There are many specific criteria that you and your project must meet before your purchases, including radiators, can be classified as VAT exempt.
1. New works or extensions
To be entitled to VAT exemption on materials for self-construction such as radiators, the property or extension you are building must meet everybody of the following criteria:
- It must be a “dwelling” in which you will live personally.
- It must be an independent dwelling without internal access to other different dwellings.
- It may not be sold, leased, rented or used as a B&B.
- It cannot be accommodation that is separate from the main house, if that accommodation cannot be sold separately from the main house, i.e. Grandma’s annexes.
- It cannot be an isolated swimming pool, toy library, workshop or similar since they are not classified as “dwellings”.
If your build meets the above criteria, you may be able to claim VAT on some, but not all, of your costs and purchases for the new build.
VAT can be claimed on construction costs incurred and goods that are provided on a “supply and installation” basis. These purchases may include built-in building materials, built-in furniture, and built-in, wired, or installed appliances, including radiators and wiring in electric central heating systems.
You cannot claim a VAT refund on appliances that are only “plugged in”, garden items such as sheds or any household furnishings.
So, for your radiators to have a zero VAT rate, you must pay for them together with their installation; otherwise you are not buying “adjusted” products and VAT is subject to charges.
By far the easiest solution to this is to have your dealer (builder, plumber, heating engineer, electrician, etc.) purchase and install your new radiators. Provided they are VAT registered, they may be able to claim a VAT refund on your behalf through your own business.
2. Convert or renew properties
Some costs incurred when converting or renovating properties may be exempt from VAT, however a number of rules apply and in this context a conversion is not the same as a renovation.
“Conversion” means that a property is changed from non-residential use to a “new dwelling” or has not been used for residential purposes for more than 10 years. If this is the case, many of the same rules apply as “new construction” detailed above. In this situation, costs such as the installation of new radiators may not be exempt from VAT, but may be charged at a significantly reduced rate.
“Renovations” are not normally considered new homes. They are only entitled to a VAT reduction when they have been uninhabited for more than 10 years, so it would be unusual to be able to claim a VAT refund on the radiators of a reform.
Once again, merchants cannot make zero-rate purchases; only VAT registered installers can do this as they can claim VAT through their business.
Alternatively, if you prefer to pay for the goods yourself, you can personally submit a claim to HMRC for the installed goods that have been installed in the property you are converting or renovating. A claim can only be filed after the completion of the project and there is usually a time limit for this.
3. Listed Properties
If you can get changes to your listed property approved, then in certain circumstances you may be able to claim a VAT refund on some items. Again, the ‘supply and install’ rule applies, so if you want to claim VAT back on radiators, for example, it’s advisable to arrange for a VAT registered trader to buy and install them.
Are there other opportunities for VAT exemption?
Not to our knowledge, however, customers often ask about other situations where they may believe that the products they buy, such as radiators, may be exempt from VAT, but are not; for example, if a customer is registered as disabled.
If you or a resident on your property is registered as disabled then you can claim a VAT refund on work done or products purchased for the adaptation of your home. However, these accommodations must be made to directly assist the resident with the disability. Unfortunately, radiators are not classified as directly helping a disabled person to manage their disability, so radiators are not exempt from VAT in this situation.
Consumers also often believe that VAT should not be charged on shipping costs they may incur, but unfortunately this is not the case. Deliveries are classified as a non-essential service, so VAT is always payable. Some VAT registered companies are not aware of this rule and incorrectly do not charge VAT on deliveries.
So I am eligible to claim part of the VAT, how do I do this?
So if you meet the criteria outlined above and you can prove it, then your property may be exempt from VAT or you may be eligible to claim VAT on qualifying goods and services.
Her Majesty’s Tax and Customs Service states that VAT must always be paid at the time of purchase of goods, even if the property qualifies for zero VAT.
You can let your builder take over this work if you are registered for VAT. If they are purchasing materials on your behalf, then they can zero your invoice and then claim the VAT refund at the end of the project.
If you choose to claim it yourself, you must submit a claim form to HMRC detailing the materials and work that you believe should receive a VAT refund.
Please note that HMRC imposes strict deadlines for claims and failure to adhere to these deadlines could result in significant loss to the owner or their contractor.
conclusion
In short, VAT costs are often an important factor when deciding whether or not to undertake a self-build or refurbishment project. Due to the potential size of the refund you may be entitled to, it is imperative that you contact HMRC directly regarding your particular situation. The information provided may be contradictory and therefore you always need confirmation that you are eligible to claim and which goods and services are exempt from VAT. It’s also vital that you talk to potential contractors ahead of time to make sure they understand the situation and are happy to go zero-rate where possible.
For more information on how to claim VAT refunds on radiators specifically, please contact a radiator specialist.