Answer in brief
Yes. A kit for extending a house you already own attracts VAT at the standard 20%, and so does the building work. A homeowner cannot reclaim it. The main ways the bill can come in lower are trades too small to be VAT registered, and specific relief for adaptations for a disabled person.
Kit prices are often advertised before VAT, because the suppliers sell to builders as well as homeowners. On a mid-sized kit the difference is thousands of pounds, so it is worth knowing exactly where VAT applies before you compare quotes.
The basic rule
HMRC’s guidance on buildings and construction, VAT Notice 708, treats work on an existing home as standard rated. An extension, however it is built, is an alteration to an existing dwelling. So:
- the kit itself, supplied on its own, carries 20% VAT,
- the groundwork, assembly and finishing trades charge 20% on top of their labour and materials, and
- as a private homeowner you cannot claim any of it back.
Our finished-room figures already include VAT. Kit prices are quoted both ways by suppliers, so when one quote looks 20% cheaper than another, check the VAT line first.
Why new houses are different
People sometimes hear that self-builders get their VAT back. That scheme is for building a new dwelling, which is zero rated, and it does not cover an extension. The same goes for the reduced 5% rate, which applies to converting a building into a different number of homes or renovating a house that has stood empty for at least two years, not to adding a room to a house you live in.
A detached annexe that is a separate home in its own right, with planning consent to be lived in independently, can fall under different rules. An annexe tied to the main house is still treated as part of it. If you are planning anything like that, get the VAT position confirmed before you order.
Where you might pay less
Trades below the registration threshold. A sole trader whose taxable turnover is under the VAT registration threshold does not charge VAT. A small groundworker, a plasterer or a decorator working on their own may fall below it, so their price is simply their price. Ask whether a quote includes VAT, and do not assume one that does not mention it is cheaper.
Adaptations for a disabled person. Certain work adapting a home for a disabled person may qualify for the zero rate, for example extending to provide a ground-floor bathroom, WC or washroom where one is needed because of the person’s condition. The rules are specific and the supplier has to agree it applies, usually with a signed eligibility declaration from you.
Energy-saving installations. Separate relief covers the installation of certain energy-saving materials such as insulation or heat pumps in a home. It applies to installing those items as a job in themselves, not to the insulation built into a kit’s wall panels.
Reading a kit quote
Look for three things. Is the headline figure before or after VAT? Is delivery inside it, and is that taxed too? If the supplier also builds, is the erection priced separately, and with VAT? A good supplier will show it line by line.
When you ask us for a quote for one of our prefab extension kits, the supplier you are introduced to prices your exact footprint, and you should expect that figure to show VAT clearly. If it does not, ask before you sign.