Could You Reduce the VAT You Pay on Your Building Project? (2025 Update)

With some property sales or building projects still experiencing delays in the aftermath of the Coronavirus and wider market changes, there are properties that may have remained empty longer than originally planned. If a property has been unoccupied for two years or more, you may be eligible for reduced VAT on construction work — a valuable saving for your overall project budget.

There are specific circumstances where the VAT liability on a building project can be reduced from 20% to 5% or even 0%, but it’s crucial to seek accurate advice early. Not all aspects of a build qualify, and understanding the rules can help you plan and structure your project efficiently.

We asked VAT expert Julian Potts from Landmark PT to answer some frequently asked questions on this topic:

In what common scenarios could I reduce the VAT liability on my project?

The reduced VAT rates (5% or 0%) typically apply to residential and charitable-use buildings. Key project types that may qualify include:

• New builds (qualify for 0% VAT)

• Conversions to residential use

• Dwellings vacant for 2 years or more (qualify for 5% VAT)

• Change in the number of dwellings (e.g. splitting one home into two flats)

• New builds with retained facades, especially on corner sites

• Works to adapt a home for disabled use

• Installation of certain energy-saving materials

• Listed places of worship (subject to specific refund schemes)

• DIY housebuilders may be able to reclaim VAT under the VAT Refund Scheme for DIY builders

📌 Note: As of April 2025, the energy-saving materials eligible for reduced VAT include insulation, solar panels, heat pumps, and certain types of glazing – but criteria can vary.

At what stage should I consider the VAT implications?

Before submitting your planning application. VAT treatment is often linked to planning permissions, and revisiting this later can be costly or impractical. Since VAT is a tax on transactions, you should assess your position before entering into any contracts.

What documentation will I need to justify VAT reductions?

HMRC will expect clear evidence that your project meets the relevant VAT criteria. This could include:

• Planning permission documentation

• Proof of vacancy (for empty homes)

• Statutory declarations

• Relevant plans and contracts

For charitable and relevant residential projects, you’ll need a formal certificate to confirm the end use. For private dwellings, no formal certificate is needed, but proper documentation is still essential.

Does reduced VAT apply to everyone working on the project?

No — reduced rates generally apply to building contractors only. Most consultants, architects, and other suppliers will charge standard 20% VAT, unless specific structuring applies. It’s worth speaking to an expert to understand if there’s flexibility in your project structure.

What about client-supplied items like kitchens or joinery?

Some items qualify, others don’t. For example:

• Standard kitchen units and bathroom fittings may qualify

• Fitted furniture, carpets, and white goods are always 20% VAT rated

There’s a detailed list in HMRC’s guidance — it’s best to check early before placing large orders.

Who can I speak to for accurate VAT advice?

Landmark PT are specialists in VAT for construction and property. They can manage the VAT process throughout your project to ensure compliance and optimise any potential savings.

📧 julian@landmarkpt.com📞 0208 878 5476

Get in touch

We at Run Projects have recently managed several builds where our clients benefitted from reduced VAT — significantly impacting their budgets in a positive way. If you’re planning a renovation or new build and want to explore potential savings, we’d be happy to help.

📧 hello@runprojects.co.uk📞 0207 384 1160