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Housing secretary Robert Jenrick shook up the housing sector on Thursday when he followed up Wednesday’s Budget with the announcement of a series of measures to improve homebuilding, such as speeding up the planning system, and supporting self builders in finding plots.

(MORE: Robert Jenrick announces planning reforms)

There were many measures proposed, and one that stood out was the potential extension of Permitted Development (PD) rights, so what could this mean for those building from scratch, extending or renovating a house?

The potential PD changes fall under two main strands: 

• The government will introduce new rights for building upwards on existing buildings by summer 2020
• A consultation will be held on potential PD rights to allow vacant buildings to be demolished and replaced with new homes. 

(MORE: Self Build: The Complete Guide)

Permitted Development: Extending Upwards

Regarding that first update, the new rights will enable building upwards, including extending residential blocks, by up to two storeys. The majority of projects which involve extending upwards currently require planning permission to ensure a design fits within the neighbourhood and that neighbours have no objections. 

(MORE: Building an Extension: A Beginner’s Guide)

The loosening of the rules, which was initially proposed last year, could theoretically make it easier for homeowners to expand their homes upwards, and provide greater leeway to extend.

However, there is concern that this could negatively impact communities, leading to a rise in poorly-designed buildings, with no formal route for neighbours to object.

Unfortunately, detail is as scarce now as it was last year about what this will mean for home improvers.

Sally Tagg, Managing Director at Foxley Tagg and planning expert for both Homebuilding & Renovating and NaCSBA, said: “It is possible that the expansion of PD to permit the extension of properties upwards by adding extra storeys could benefits those wishing to extend their home. However, we do not know what caveats and restrictions will be placed on this.

“Clearly the announcements are high-level in that they are light on detail at this point. And as ever the devil will be in the detail.”

Tagg added that while this could yet be a positive move for homeowners, other homeowners could be more negatively affected.

“Such an expansion has the potential to adversely affect homeowners if it permits large and unattractive extensions to a neighbour’s property, which has the potential to adversely affect one’s amenity through loss of light, loss of privacy and the creation of a sense of overbearing. As such, any new PD provision that impacts upon the opportunities for neighbours who may be adversely impacted to have their say needs to be treated with caution.”

David Renard, planning spokesman for the Local Government Association, said the government should not “take away more of the powers councils and communities need over planning”, expressing his concern about the impact of this potential change.

Replacing Vacant Buildings

The second proposal will involve a consultation into allowing empty buildings to be demolished and replaced with housing without the need for a planning application.

If this proposal gets the green light, it could theoretically lead to increased numbers of affordable homes, providing housing for those struggling to get onto the housing ladder. The only reportedly stipulation so far for these new builds is that they are well-designed new residential units which meet natural light standards. How this will be policed has yet to be revealed.

Adrian Dobson, professional services director at the Royal Institute of British Architects (RIBA) said that allowing the demolition and replacement of industrial and commercial property is a contradiction to the government’s plans to their commitment to delivering high-quality housing.

“Current rules allow developers to create housing which fails to meet even the most basic spatial, quality and environmental standards,” he said. 

“Rather than driving a green housing revolution, the government’s plans to allow the demolition and replacement of industrial and commercial property with housing under permitted development would make it easier to build the slums of the future.”

Tagg stressed that caution should be exercised before any conclusions are made as to what this will mean for the housing sector. “Again, we need to see further detail to even begin to consider the potential implications.”

Will the outcomes of this consultation prospectively affect self builders? Tagg says it’s too soon to tell, but believes opportunities will be unlikely, rather the amendments would be aimed at developers who will demolish and rebuild entire blocks.

“In order to ensure that this mechanism is not used by some to develop poor build quality and designed homes for the future there needs to be carefully worded provisions within the PD criteria. The difficulty is that there have been some poor examples of housing derived from office conversions where there are no space standards on conversions. To avoid this being repeated, careful consideration of these issues needs to be built in.

“With the caveats of the above, there may be an opportunity for group self-build and co-housing but led by enablers, again though this will be hugely dependent upon the details, but it would be a potential reuse of previously developed land and in urban settings these could be a sustainable option to bring land back into use.”

Aspiring self builders can learn all about building their own home at the Self Build Wales launch event this month, and discover how the scheme breaks down barriers that self builders face.

The Self Build Wales launch event on 21 March will enable budding self builders, as well as builders and architects, to speak to experts about the Self Build Wales scheme, its benefits, and how to apply.

Visitors will be guided through Self Build Wales’ four-step process, with a full breakdown of how building your own home will work under the scheme. 

The launch event will be held from 10:00am – 3:00pm on 21 March at Dylan Thomas Centre, Swansea. You can register for the event here.

What is Self Build Wales?

Self Build Wales is a groundbreaking scheme that provides self and custom builders with a complete package of financial support, and access to land with planning permission already granted. 

The scheme is designed to appeal to as many people as possible, including first-time buyers and growing families, and aims to provide a route for people to live in their local area, especially if they haven’t previously been able to afford to buy there. 

“We want to make self build available to many more people in Wales, not just the most privileged households,” said housing and local government minister Julie James.

Andrew Baddeley-Chappell, chief executive of the National Custom and Self Build Association (NaCSBA), said: “Self Build Wales addresses an important challenge for self builders: the ability to build when they have a limited deposit, and it adds certainty by providing plots with agreed planning permission and set prices.”

How Does Self Build Wales Work?

The core of the self build scheme is the so-called plot shop, which involves local authorities identifying plot opportunities and selling them with planning permission already in place.

The scheme is being financed by the Welsh government, with funding to be administered by the Development Bank of Wales. 

Applicants will only need to pay 25% of the cost of a plot. The remaining 75% is covered through a self build development loan issued by the Development Bank of Wales, which also covers the full cost of building the property. Repayments only need to be made once the house is completed and mortgaged.

With all the planning, decision making and, in some cases, actual building involved in bring your homebuilding vision to life, it is quite easy for self builders to forget to reclaim VAT on their new build house under HMRC’s DIY Housebuilder’s Scheme.

But if you want your self build project to be financially successful, this stage is vital.

As long as your project is eligible and you keep all the necessary receipts to submit with your claim, you could reclaim the 20% of the total project budget accounted for by VAT.

This article will explain all you need to know about reclaiming VAT — from the aspects of the project that you can reclaim on, what documentation you will need to provide and most importantly, which projects are eligible.

(MORE: The Complete Guide to Self Build)

What are the Rules When Reclaiming VAT on a New Build?

The DIY Housebuilders Scheme (Notice VAT431NB for new builds and Notice VAT431C for conversions) allows you to reclaim VAT from HMRC that you have paid out for your project if you are:

• building a new house
• converting a building into a new dwelling
• bringing an existing dwelling that has not been lived in for 10 years back in to use.

Which Projects are Eligible?

To be eligible, the project has to create a new dwelling in its own right. Extensions, refurbishments and annexes, do not create a new dwelling in their own right, and so are not eligible.

Your project must be lawful, for personal occupation by you or a family member and evidence of completion must be provided. Some planning permissions include conditions or restrictions on use or occupancy, which may mean that the project is not eligible.

If your project changes in nature during the course of works (e.g. from an extension to a demolition and new build), then to be eligible you must obtain planning permission confirming this before works continue.

For every self build, HMRC will request to see:

• valid planning permission, including your detailed plans
• evidence of completion (usually a completion certificate, habitation certificate or a valuation office listing letter)

Only one claim is allowed and all relevant documentation and invoices (which we’ll come onto) have to be submitted to HMRC within three months of your completion certificate being issued.

You will usually get the refund within 30 working days of sending in the claim.

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How Much VAT Can I Reclaim on my Self Build?

Many self builders regularly overlook this area, but you should ensure that you are charged the correct rate(s) of VAT on all costs associated with your project.

Getting this right is very important, as HMRC will not refund any VAT that has been incorrectly charged.

For new builds, conversions, and renovations that bring a dwelling that has not been lived in for 10 years back into use as a dwelling:

• The supply of materials only is always at the standard rate of VAT, which is currently 20% (5% on some energy items). You can recover all of the VAT incurred on eligible materials via the scheme
• The supply of labour only or the joint supply of labour and materials should be at the zero rate (0%) for new builds and at the reduced rate, currently 5%, for conversions and renovations that bring a dwelling that has not been lived in for 10 years back into use as a dwelling. At the end of the project, the owner can reclaim the 5% VAT on eligible joint supply of labour and materials.

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What Projects Can I Reclaim VAT On?

The type of projects you can reclaim VAT on under the DIY Housebuilders’ scheme include:

• New builds. Creating a new dwelling built from scratch, providing it is to be used by you or your relatives as a family home for residential or holiday purposes. Any existing building must be demolished to ground level. Where required by planning consent, an existing façade can be retained
• Garages for use with the new dwelling and covered by planning permission at the same time
• Conversions that create a new dwelling. Converting a non-residential building, for example, a barn, old church, business premises, into a new dwelling
• Renovations that bring a dwelling that has not been lived in for 10 years back into use as a dwelling
• If the new build or conversion is a holiday home for you and your family’s personal use
• Landscaping and outside works covered by your planning permission. This may include paving, fencing, turf and shrubs, and so on.

Which Materials Can I Claim VAT Back On?

Examples of the materials you can claim VAT back under the DIY Housebuilders’ scheme:

• All materials normally incorporated in a new dwelling — all construction materials, for example, concrete, blocks, bricks, insulation, sand, cement, plaster, timber, roofing, stairs, windows, guttering, doors, paint, etc
• Electrical and plumbing materials
• Fitted furniture such as kitchen units and worktops   
• Extractor fans
• Fittings, such as light fittings, wooden floor systems, linoleum, floor tiles, door furniture, fireplaces and fires, fixed towel rails, mirrors, solar panels, boilers, sewage treatment plants, TV aerials, curtain poles
• Swimming pools and saunas inside or linked to the new dwelling
• Delivery charge included on an invoice for materials

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Getting Advice on Reclaiming VAT on a New Build

Many tradespeople and contractors are not experienced in dealing with the VAT rules on new builds and eligible conversions.

They sometimes say: ‘it doesn’t matter now, as you will get the VAT back at the end anyway’.

However, this is not true. Don’t leave it to the contractor.

If you are unsure of any aspect of VAT on your project, engage the services of a professional to help you get it right.

Special Circumstances

• Renovations to dwellings empty for two years or more are eligible for the reduced rate of VAT of 5% via a VAT-registered contractor
• Works involving a net change in the number of dwelling units are also eligible for the reduced rate of VAT of 5%. Examples include converting two cottages into one house or reverting three flats back into a house
• Some adaptations work to alter a house for someone who is disabled is zero rated for VAT.

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The Importance of Valid VAT Invoices

Ensure you retain all valid VAT invoices, as the originals must be submitted to HMRC with your claim.

Electronic payment receipts and emails confirming orders are not valid VAT invoices and so any VAT paid is potentially lost.

Invoices should include:

• the supplier name
• their VAT number
• the invoice date
• a description of the goods supplied (and services if applicable)
• the value of the invoice

If one of your tradespeople/contractors uses their trade account to source your materials and so is in their name, ensure that you pay the supplier direct and keep the evidence, as it will be required.

The VAT incurred on invoices from VAT-registered suppliers in the EU can be claimed too, as long as the invoice includes the relevant information (including their VAT number).

Many purchases are made online these days, so ensure that you obtain a valid VAT invoice when buying, as this may prove difficult to obtain at a later date.

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About the Author

Andrew McDonald (MAAT FCCA) is a qualified accountant who has built his own house.

He prepares and submits VAT claims for domestic clients and assists clients who require VAT advice throughout their project.

He also deals with HMRC reviews and appeals, and tribunal cases following rejected VAT claims.

Housing secretary Robert Jenrick has announced a series of reforms to improve homebuilding in England, and the measures could positively impact self builders, renovators, extenders and aspiring homeowners.

The updates include:

• New Permitted Development (PD) rights will be introduced this summer for building upwards on existing buildings. 
• A pledged to support community and self build housing
• Speeding up the planning permission system
• A reaffirmed commitment to reach net zero emissions by 2050
• Investing £400m to use brownfield land productively
• Reviewing the government’s policy for building in areas at flood risk

The government’s Planning for the Future document says

Permitted Development Changes

Mr Jenrick has announced new PD rights for building upwards on existing buildings, including extending residential blocks, by up to two storeys. These will be announced in the summer, it has been confirmed.

The announcement elaborates on the government’s pledge last year to waive planning permission on two-storey extensions, but its reception among industry experts is mixed.

The Gvt’s plans to expand permitted development rights is reckless. If they are intent on continuing it, they must ensure that the proper safeguards are in place.

We’re urging them to establish a #HealthyHomesAct to enshrine the key principles of a healthy home in law.

— TCPA (@theTCPA) March 12, 2020

On the one hand, this could provide homeowners with greater leeway to extend their homes, and homeowners would no longer be required to seek approval from neighbours. However, there is concern that this could negatively impact communities, leading to a rise in poorly-designed buildings, with no formal route for neighbours to object.

Helen Hayes, Labour Member of Parliament for Dulwich & West Norwood, said: “Expansion of permitted development rights is an unmitigated disaster for many communities – yet instead of stopping this harmful policy, govt is proposing to extend PDR under banner of ‘planning freedoms’ to allow upwards extension & demolition without full planning permission.”

There will also be a consultation on the detail of a new PD right which will allow vacant commercial buildings, industrial buildings and residential blocks to be demolished, and replaced with new residential units which meet natural light standards. 

Focusing on Self Build

In a very welcome move for the self build sector, Mr Jenrick also pledged to support community and self build housing. 

The self build industry has been awaiting an update to the Conservative Party’s General Election manifesto, which promised to help first-time self builders access the Help to Buy scheme using 5% deposit mortgages, and while there was no elaboration on this pledge, it is encouraging that removing barriers facing self build is being addressed.

“We will support those who want to build their own homes to find plots of land and provide help to parish councils and neighbourhood forums who wish to build a small number of homes to allow their communities to grow organically, providing homes for the next generation and those wishing to downsize,” the report says. 

Speeding up the Planning System

As part of its outline to speed up the planning system – which has faced criticism for the government will deliver automatic rebates where planning applications are successful at appeal. This means that where applications are refused, applications will be entitled to an automatic rebate of the planning application fee, subject to a successful appeal. 

This will promote proper consideration of applications by planning committees, the government says. 

There will also be a Planning White Paper released in the spring which will propose measures to accelerate planning, and utilise new technologies to modernise the system.

Brian Berry, Chief Executive of the Federation of Master Builders, said: “The current planning system is a major barrier for small house builders, so today’s announcement that it will be brought into the 21st century through digitisation and simplification is a victory for common sense.”

The government will also work with local authorities, small and medium-sized enterprise (SME) homebuilders, the construction industry and others this summer, to shape a long-term reform of the planning system and housing market. 

Net Zero Emissions

The government has reaffirmed its commitment to reach net zero emissions by 2050, and plans to deliver a revolution in green housing.

It will introduce a Future Homes Standard from 2025, which will require up to 80% lower carbon emissions for all new homes. This, the report says, will help to bring an environmental revolution to homebuilding, tackling climate change while keeping household bills low.

Brownfield Investment

In order to build more homes for local people, the government has revealed it will invest £400m to use brownfield sites productively.

It also confirmed that ministers will work with local authorities to regenerate brownfield land and deliver the homes communities need on land which is already developed.

Flood Risk Defences

With inclement weather affecting many homes this year, the government has acted to shore up its flood risk strategy.

It will review its policy for building in areas at risk of flooding, and seek to ensure that communities across the country are aware that future development is flood proof.

In Wednesday’s Budget, Chancellor Rishi Sunak also announced a £5.2bn investment in additional flood defences across the country.

The UK’s leading website for buying and selling land or renovation opportunities, Plotfinder, is launching a new email service that provides in-depth advice to anyone locating, purchasing and developing plots. And for a limited time, you can get free access to the first email to give you a taste of what to expect.

During Plotfinder’s 20 year history, it has helped thousands of people to fulfil their self build and renovation ambitions.

Plotfinder connects those looking for land or renovation opportunities with thousands of estate agents and auction houses across the UK, providing aspiring self builders or renovators with a one-stop shop for plots or properties requiring renovation.

For a limited time, Plotfinder is offering free access to its new Plotfinder Pro service. Plotfinder Pro subscribers will receive a weekly in-depth email bulletin on topics such as planning permission, build techniques, new products and finance.

Additionally, Plotfinder Pro subscribers will get:

• Exclusive expert insight from industry experts 
• Full access to details of all plots and renovation opportunities listed on Plotfinder
• Two free tickets to any Homebuilding & Renovating Shows, worth up to £216 per year

Among the industry experts offering advice is Michael Homes, an experienced self builder and renovator who is chair of NaCSBA, presenter of multiple property TV shows, and the author of Renovating for Profit.

To offer a taste of what to expect, Plotfinder is offering free access to the first few emails. You can join Plotfinder Pro for just £8.50 a month.