17. Will I pay VAT?
Builders and architects will always discuss cost excluding VAT, but generally if the work is to an existing building you will pay VAT at the current rate on all building work. The good news is that new residential buildings are zero rated for VAT. This also applies if you demolish an existing building completely to rebuild in the same site, but it must be taken completely down to the ground.
There are certain items of work to existing buildings that can be charged at a lower rate of VAT, such as work to meet disability requirements and some energy efficiency requirements. If such savings are likely to be significant on a project we have an established relationship with a VAT consultant who can assess the scheme and provide a certificate to the contractor to authorise an adjusted VAT charge, however for budgetary purposes with an existing building it is safer to allow for full VAT on all costs. The builder is of course, acting as a tax collector for the Government and will periodically forward the VAT received onto HMRC. Architects and other professional services consultants are always required to charge VAT. Businesses can often reclaim the VAT paid, however this is unusual for domestic projects, and you should allow for it in your budget.