Topic: VAT on use your own labour

The company is also building a new head office for its own occupation. It will purchase building materials but use in-house labour to carry out the work. A third party labour only quote was received for £140,000 plus VAT but this was regarded as too expensive. I hear there is self-supply implications>? Could someone explain?

Re: VAT on use your own labour

The self-supply rule applies where there is a construction of a building or an extension to an existing building – the extension increasing floor space by at least 10%.

The value of the construction services must be over £100,000 in a year for this self-supply rule to apply.

The self-supply rule basically calculates output tax on the open market value of the construction services and so this output tax has to be accounted for by the business on the VAT return.

By the same token, this output tax forms input tax which the business can recover in the normal way so, if it uses the building to make taxable supplies in any way, then that proportion of input tax can be recovered.

The self supply rules effectively puts the trader in the same position as if they had engaged the registered contractor.