In most cases, contractors will need to add 20% VAT to the supply of their construction services, and that will add 20% to the costs of any customer who can’t recover VAT – eg, a homeowner, or residential landlord.

The main exceptions to the 20% rate are a) the construction of a ‘new dwelling’ (which is zero rated for VAT purposes), and b) some conversions and refurbishments (see ) which carry VAT at the lower 5% rate.  

Knowing where and when these exceptions apply is essential if you are to be as competitive as possible when pitching for work.

For example, the lower rates do not normally apply to the related costs of surveyors, architects, site supervisors, and consultants; at least, not  if they are supplied independently of the construction services. However, the same services may be zero or 5% rated in a ‘design and build’ contract – ie, where the contractor supplies these services as part of the overall project.

Whether you are the contractor or the customer it is therefore worth getting advice on the VAT implications of construction work.