smallbusiness.co.uk: Helping your business think big

There are three categories of product or service for VAT. The majority of goods and services are Standard rated (subject to VAT at the standard rate, currently 17.5 per cent), some are ‘Exempt or Zero-rated’ and some are at a ‘Reduced Rate’ (currently five per cent).

Zero-rated supplies include water and sewerage services, books newspapers and leaflets, talking books for the blind, transport services, exports of goods, children's clothing and shoes and for supplies of certain qualifying buildings such as newly constructed residential buildings and substantial reconstructions of protected buildings.

Exempt supplies include supplies of land and buildings (except where the option to tax applies), financial and insurance services, postal services, betting and gaming, health and welfare services and education.

Reduced rate supplies include domestic fuel or power, installation of energy saving material, certain conversions of buildings into residential accommodation and also for renovation and alteration of residential buildings that have been empty for more than three years. Normally the renovation and alteration of buildings is standard rated.

From the above you might conclude that the VAT position on building work can be complex. In most cases VAT is standard rated.

There is useful guidance entitled “What is VATable?” on the HMRC website and a link through to the various detailed VAT Notices.

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