VAT Refund for Charity Buildings

If your charity is constructing a new building or converting an existing one for charitable purposes, you may be able to reclaim the VAT paid on construction costs through the DIY housebuilders scheme. This can result in substantial savings, but strict eligibility rules apply and you must follow the correct claims process. Understanding what qualifies and how to make a claim can help your charity recover thousands of pounds.

Who can make a claim

To claim a VAT refund under the DIY housebuilders scheme, your organisation must:

• Be a charity recognised by HMRC and registered with the appropriate charity regulator
• Be constructing or converting a building intended for use solely for a relevant charitable purpose

If your charity is not currently recognised by HMRC, you can apply for recognition online before making your claim.

What counts as a relevant charitable purpose

A relevant charitable purpose building is one used by a charity for non-business purposes. For VAT purposes, even activities that don't make a profit (or where any profit furthers the charity's aims) can still count as business activities and may not qualify.

Examples of qualifying buildings include:

• Places of worship
• Offices used for administering non-business activity, such as collecting donations
• School buildings where no fee is charged for providing education
• Research buildings where the research is grant funded
• Scout and guide huts used purely for scouting and guiding activities

Buildings or parts of buildings that do not qualify include:

• Fee-paying child nurseries or schools
• Facilities used for business activities, such as fundraising events where an entrance fee is charged

The 'solely' requirement and minor non-qualifying use

Your building must be used solely for a relevant charitable purpose. This means it cannot be used at the same time, or at different times, for other purposes.

However, HMRC accepts a 5% margin for non-qualifying use. If 95% or more of the building's use qualifies for relief, the 'solely' requirement is satisfied. This helps avoid disputes in marginal cases.

Relevant residential purpose buildings

The scheme also covers certain residential buildings used by charities for non-business purposes. Qualifying buildings include:

• A home or institution providing residential accommodation for children
• A home or institution providing residential accommodation with personal care for elderly people, people with disabilities, or those with past or present dependence on alcohol or drugs or mental health conditions
• A hospice that provides residential accommodation (such as beds for patients)
• Residential accommodation for students or school pupils
• Residential accommodation for members of the armed forces
• A monastery, nunnery or similar establishment
• An institution that is the sole or main residence of at least 90% of its residents

Buildings that do not qualify include:

• Hospitals or similar institutions
• Prisons or similar institutions
• Hotels, inns or similar establishments
• Relevant residential purpose buildings used for business purposes, such as where someone charges residents for staying
• A detached building in the grounds of an existing care home that extends the home's facilities
• Hospital ward blocks
• Day care units at hospices

What you can claim for

You can claim VAT refund on eligible goods and services used in the construction or conversion. You must have a VAT invoice for all eligible goods you claim for. The goods must have been supplied to you, and HMRC may ask you to prove you have paid for them.

Each VAT invoice must show:

• The supplier's name, address and VAT registration number
• Date of issue
• The quantity and description of the goods
• Your name and address (if the value is more than £250)
• The price of each item showing the VAT treatment

Time limits for making a claim

The time limit for your claim depends on when your building was completed.

For buildings completed before 5 December 2023:

You must make your claim no more than 3 months after the new build is completed. The 3 months start from the date of the completion certification or other evidence of completion.

For buildings completed on or after 5 December 2023:

You must make your claim no more than 6 months after the building is completed. The 6 months start from the date of the completion certification or other evidence of completion.

If you cannot make your claim within these time limits, you should write to HMRC explaining the reasons for the delay.

You can only make a single claim under the scheme. However, if you have already submitted a claim form, you can send additional information or invoices for a claim that has not yet been paid, or has been paid (within 4 years of the building being completed).

Documents you need to submit

When making a claim, you must send:

• The claim form (for claims by post), including a schedule of all invoices you want to claim for
• Your claim calculations
• Evidence that the construction or conversion is completed
• A copy of the planning permission
• Plans of the building
• If claiming for a building used for a relevant charitable purpose, a declaration about whether you are using the 'minor non-qualifying use' concession

Do not send original documents as HMRC cannot return them.

You must keep records of all invoices, bills, credit notes and other documents to support your claim. HMRC will contact you to let you know which invoices you need to send. You should record invoice details in a schedule of invoices template available on GOV.UK.

How to make your claim

You can make your claim using the online service or by filling in form VAT431NB.

You can authorise an agent (such as your accountant) to act on your behalf using form 64-8. Your agent can then complete and submit the claim form and any supporting information. The authorisation covers only one DIY claim, and you will need to enter your National Insurance Number on the form.

It remains your responsibility to ensure the information on the claim form is accurate and complete. VAT refunds will be paid into the bank account of the charity making the claim.

Keep a copy of your claim as HMRC may ask you questions about it later.

Sources

• VAT refunds for constructing a new charity building
• Claim a VAT refund for a new home or charity building if you're a DIY housebuilder
• Goods and services you can claim for under the VAT DIY scheme
• Tax agents and advisers: authorising your agent (64-8)
• Charity recognition by HMRC

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.