Your builder can sometimes charge VAT at 5% instead of 20%. 

In general, rental income and selling many properties are VAT exempt, thus the owner cannot recover VAT on related costs, however there are circumstances where you can save vat on SOME costs - but some strict rules can apply.

BRIEF OUTLINE

RESIDENTIAL CONVERSIONS

Converting any kind of commercial property to residential accommodation, e.g. farm buildings, office blocks etc.

CHANGE IN NUMBER

Changing the number of units, e.g. convert a detached house into two semi-detached houses.

APARTMENTS

Can be assessed on a floor by floor basis. A floor that sees and increase or decrease in number apartments would be applicable for 5% VAT but a floor where there is no change in the number of units, standard 20% VAT will apply.

EMPTY PROPERTIES

If a residential property has been empty for two years, 5% VAT can apply to some costs - evidence will be required.

DESIGN & BUILD

If you are undertaking a project where 5% VAT applies there will be some areas where you must pay standard 20% VAT; if you engage professional services directly, e.g. architects, surveyors, project manager, standard 20% vat will apply. However if the builder engages the professional's, they can recover the input VAT and only charge you 5% VAT.

FURTHER DETAILS AVAILABLE:

• DOWNLOADABLE DOCUMENT CONTAINING FURTHER DETAILS INCLUDING VAT PLANNING TIP
• VAT NOTICE 708 - LINK TO HMRC