The scheme enables private individuals who perform conversions on a property to recover VAT. HMRC updated the listing in October 2021 to reflect that manual window blinds and shutters now fall under the VAT DIY Scheme.
What is the VAT DIY Scheme?
The VAT DIY Scheme enables private individuals, i.e. persons acting on a do-it-yourself basis rather than hiring a contractor, to reclaim VAT on applicable goods and services involved in the construction activity.
In the UK, construction is zero rated for VAT under certain conditions. Notably, when a property is developed solely for residential purposes. The zero rating applies to contractors that comply with the conditions set out by HMRC.
By enabling private individuals to reclaim VAT on conversions to a property they conduct themselves, the VAT DIY scheme therefore creates a comparable VAT benefit for individuals.
The scheme is designed for private individuals working applicable properties on a DIY basis. However, the provisions do not exclude individuals from contracting certain services. For full clarity on how commissioning services may affect an individual liability, it is advisable to consult with a VAT specialist.
HMRC maintains a list of goods and services, including the recently updated items noted above. See the complete list here. (The list also includes a list of items which are not allowed under the scheme.)
Recent changes to UK VAT regulations, applying a domestic reverse charge to certain transactions, have reportedly put pressure on some businesses.
Subcontractors who previously charged VAT on their invoices must now instead apply for a rebate from HMRC. Some contractors complain that the process is too slow.
HMRC announced it will compensate companies if payments take longer than 31 days.