Zero-Rated (VAT in Construction)

Zero-rating is the VAT treatment that applies to construction services for qualifying new dwellings and relevant charitable buildings — charged at 0% rather than 20%, with the construction VAT reverse charge and CIS sitting alongside.

Where it sits: VATA 1994 Sch 8 Grp 5 (as amended); HMRC Notice 708 governs the qualifying conditions. The domestic reverse charge (2021) and CIS interact on payment.

Zero-rating is a conditional relief, and the conditions do the work: a new dwelling qualifies; most conversions do not; a building that changes qualifying status mid-works can flip the treatment of everything already invoiced. The certificate the customer gives is not a formality — an incorrect certificate leaves the contractor accounting for VAT it never charged.

The reverse charge sits on top: on affected supplies the customer accounts for VAT rather than the contractor, which strips working capital from the supply chain — the mechanism behind the cash-flow complaints the industry has made since 2021. Commercial teams price VAT positions before tender, not after invoice.

Related: final account