VAT back?

jcaud97

I am converting a house i own into to two new houses, by dividing it into two and adding an extension. I dont intend to live in either house when they are finnished. ( it will cost about £65,000 to do on top of the price of the house ) Is there anyway i can claim the VAT back on this project. ie limited company or Vat back on new build or any other ideas. CHEERS:beer:

Pumpkinface_2

You don't claim VAT back as such. Businesses that are registered for VAT can offset VAT they pay out against VAT they collect from customers that they themselves provide goods or services too. It does not sound like this is the going to be the case for you.

keigcf

Its not a new build, so thats no. If you were a business,doing up houses and vat registered then you could claim the vat, but.... you'd pay tax on the profit as its your business

JasonLVC

If the house has been empty for more than 2 years then the conversion works of turning one dwelling into two would attract a VAT rate of 5%, not 15% - that is, the contractor would charge you 5% VAT for the works they provide to you in convertting the property.

There's no point registering for VAT. If you rent out the properties then this is an exempt activityi for VAT purposes. Exempt means you cannot charge VAT on the rent and you cannot reclaim ANY input VAT associated with the dwelling.

If you sell the dwellings, they are also exempt so again, no VAT charged none reclaimed. You can only zero rate a new dwelling - for it to be new it has to have not existed before, your dwelling already exists, all you are doing is splitting it into two dwellings - which isn't the same I'm afraid.....and extensions never count as new dwellings either.

So you cannot reclaim VAT and HMRC will refuse you a number if your only income is exempt anyway.....but you may still want to set up a Ltd Co. for direct tax purposes. If you hold them personally, you'll be liable for Capital Gains Tax (CGT) on their disposal (assuming you are selling them), and even if you rent for now, eventually you will sell them and you'll be hit for CGT and also personal income tax as well.

If held in a company structure, the business owns the assets and upon disposal no CGT applies and you can withdraw the value from ther business via a salary (taxed at upto 40%) or via a dividend at a much lower rate - plus a company provides some protection to you personally in terms of debts, whereas if you hold personally and you fail to keep up the mortage/loan.......they could be repossessed and you lose it all.

jcaud97

Thanx for all your advice the 5% Vat rate seems the most straight forward. Is there a form from the Vat office or someone to inform to receive this rate of tax. cheers

00ec25

if you feel up to it, the technical guide is, as ever, available on HMRC website

I'm not quite clear as to the status of your property:
- if it has not been empty and is still in use as a residence then refer to section 7
- if it has been empty (for at least 2 years) then refer to section 8

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_CL_000513&propertyType=document#P666_67813


you will need to use a VAT registered builder (so no cash in hand cowboys!) or alternatively, if you are physically doing the work yourself, there is additional guidance on how the DIY builder claim scheme operates

JasonLVC

There are no forms to fill in, you must engage a builder/sub-contractors and notify them that your building works are eligible for 5% reduced rating and they will invoice you at the lower VAT rate.

If you do the work yourself, there is no entitlement to the reduced rate - you cannot go to B&Q/Wickes and ask them to reduced rate the bricks/wallpaper.

You cannot use the self-build DIY scheme as this only applies to people building a NEW dwelling - extensions and refurbishments are not permitted.

The property MUST be empty for more than 2 years and the contractor should require evidence of this, such as council tax bill with the empty house discount, local electoral register showinjg no-one living there or letter from council confirming no bins have been emptied for two years, etc. The builder/subby can refuse to accept your evidence and there is nothing you can do about it - you must convince them you are right by showing them the evidence or pick another builder who is more clued up on these things.



You've got to work hard for that 5% VAT rate!

jcaud97

Will try my best thanx again

James,_Oxford

I think the requirement for a property to be empty for more than two years is a red herring here!

The conversion of a single home into two separate dwellings should qualify for the 5% reduced rate (provided it meets the other conditions) irrespective of whether it has been empty or not.

James,_Oxford

One other thing, and a point which someone has already mentioned - don't buy the building materials yourself. The supply of some building materials can also qualify for the reduced rate but only when supplied a builder who is providing reduced rate construction services. You might want to choose the materials yourself or believe you're doing the builder a favour but you could end up losing out!

NSR_3

Hi I am new to the site, but wanted to add to the forum regarding VAT excempt on new build, we are looking at converting a workshop into a dwelling which has never been a dwelling and has been unused for 10+ years, would this be VAT excempt or 5%, the HMRC website is not totally clear.

Mnay thanks for any advice any one could give on this matter.