VAT on a House Extension: When the Quote Is Ex VAT

The cheapest-looking extension quote is sometimes the one that has not added VAT. On an £80,000 build, 20% is £16,000. That is not a detail to find at the first invoice.

I am not a tax adviser. What follows is the shape of the rules as HMRC publishes them, so you know which question to ask. Your accountant or HMRC is the place for a ruling on your house. The manual is VAT Notice 708, and the empty-home section is covered in HMRC's VAT Construction guidance.

What most South West London extensions pay

An extension or renovation of a home you already live in is normally standard-rated. The builder charges 20% VAT on labour and on materials if they are VAT-registered. There is no general relief for "it's only an extension" or "it's our only home".

A builder who is not VAT-registered does not add VAT to their invoice. They also cannot reclaim the VAT on materials they buy, so those materials are already VAT-inclusive in their cost. A non-registered builder is not automatically 20% cheaper. Ask whether they are registered, and whether every figure you are comparing is ex VAT or inc VAT. The registration threshold is on gov.uk — it has been £90,000 of taxable turnover. Check the current figure before you rely on it.

When another rate can apply

These are narrower than people hope.

5% if the home has been empty for two years immediately before the work starts. HMRC's construction guidance describes the reduced rate for renovating or altering a property that has not been lived in for two years. You need evidence — council tax records or a letter from the council — and the builder needs it before they invoice. This is the one people miss.
5% on some conversions that change the number of dwellings, or convert a non-residential building into a home. A normal side-return on a house you live in is not that.
0% on a genuinely new dwelling, including some self-contained annexes that qualify, often through the DIY housebuilders scheme rather than through the builder's invoice. An extension with an internal door into your existing house is not a new dwelling.
Energy-saving materials can be a different rate from the building work around them. Do not assume the whole extension follows the rate on the insulation.

Listed-building work is not automatically reduced. Since 2012 the blanket zero rate on listed alterations has gone. Get advice before you budget a relief you may not have.

How this shows up in a quote

When I compare tenders I put VAT in its own column. Otherwise the builder who wrote "ex VAT" at the bottom loses to the builder who buried it, or wins for the wrong reason. Professional fees — architect, engineer, party wall — are their own invoices, usually plus VAT as well. My fee is calculated on the ex-VAT build cost, and VAT on my invoice is separate if it applies. The illustrations on the fee page are ex VAT on purpose.

The money point is simple. Finding that three quotes are not on the same VAT basis is one of the dull ways a client-side review pays for itself. It does not require a dispute. It requires the question before you sign. The pressure point is the same moment: you are about to appoint someone, the numbers almost agree, and you do not want to be the person who misunderstood the bottom line.

If you have quotes and you are not sure they include the same tax, send them. I will say if they do, and if the rest of the scope matches. Comparing scope is the larger job: how to compare builder quotes.

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