Some of the info posted previously is wrong. Here is a summary from a self builder that has been through the Self Build VAT reclaim process for a new build.
1) Self Builders can reclaim the VAT they have paid on materials. They cannot reclaim the VAT that trades have purchased for them see 3).
2) Labor must be zero rated to the self builder. They cannot reclaim VAT incorrectly paid on labor..
3) In the case of "Supply and fit" on the same invoice BOTH must be zero rated to the self builder. A typical example would be an electrician or plasterer. If you are a non VAT registered trade I suggest you ask the selfbuilder to purchase the materials instead.
4) Self Builders cannot reclaim VAT on tool hire alone. For example a nail gun hire is standard rated and not reclaimable. However....
5) If the equipment comes with an operator (eg digger and driver) then this counts as labor and both must be zero rated to the self builder.
The above applies to most things incorporated into the house or plot but there are exceptions such as carpets or white goods that are standard rated and not reclaimable.
Demolition of an existing building and similar work that is closely associated with the construction of a new house (eg diverting services) must also be zero rated to the self builder.
Most landscaping work should be zero rated to the self builder (eg Fences, lawns, driveways, patios). However VAT on trees and plants can only be reclaimed if they are shown on a landscaping plan attached to the planning permission. Such a drawing isn't always mandatory to get Planning Permission but can be provided voluntarily with the planning application.
Sometimes HMRC will refuse to refund VAT on items "not normally incorporated into a dwelling", the only example i can recall was a car turntable needed to allow a car to drive out of a tight plot in forward gear. However I think that was overturned and allowed on appeal.
Some trades are reluctant to zero rate the materials they supply and fit (see 3 above). If you are worried HMRC won't refund you ask the self builder for a certificate. This is essentially a letter stating that the work should be zero rated and including details of the project such as their name, address, planning reference etc. Neither the trade nor the self builder is obliged to provide a certificate to HMRC according to the rules but they have been found to help smooth problems.
Conversions are treated differently to New Builds. In general 5% VAT should be charged instead of zero rating and the owner can reclaim it.
PS: If a trade provides a quote for labor that incorrectly includes VAT I recommend self builders ask for the quote to be amended before accepting it. That may avoid an argument later.
