Reduced VAT rate for Renovation of unoccupied houses?

BatCat

Hi Folks,
Has anyone ever claimed a reduced VAT rate for renovating a house that has been unoccupied for over 2 years?
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_CL_000513&propertyType=document#P843_80380

You can only reduced-rate the renovation or alteration if, in the 2 years immediately before you start your work, the qualifying residential premises have not been lived in.

The reduced VAT rate is 5%.

Our builders aren't VAT registered (small firm) but the materials they are using on the house obviously have full VAT added on. We've also bought a couple of things like doors and are going to need services that are also charging full VAT. I called HMRC and they kept referring me to their website and said my builder would know how to sort it, but as my builder is not VAT registered they don't know.

Thanks,
BatCat

gas4you

Normally anyone who is VAT registered, gets charged the full VAT rate on anything they purchase, then claim this VAT back each quarter in their VAT return.

You would then be charged VAT at 5% by the contractor, who then pays this VAT to HMRC each quarter. In reality all that is paid is the difference of what we charge the customer and what we have paid on our supplies.

You should be able to get all the builders reciepts and claim all the vAT difference back yourself at the end of the job though, but will have to handle it all yourself.

If any doubts about VAT, the ONLY way to get a definitive and legally binding answer is to write to your nearest VAT office. They should reply within 14 days. Their written reply is the only answer that is binding.

Alan_M_2

Any materials on which your reclaiming VAT will have to be bought in your name. You will have difficulty trying to claim VAT on an invoice in someone elses name (i.e. your builder) as He's not VAT registered.

So, get an account in your name at the merchant where your builder is buying the materials,give authority for your builder to buy materials on this account for your build only, you pay the bill, you reclaim the VAT.

BatCat

Thaks for the guidance folks! Much appreciated!
Any idea where I could find the forms for reclaiming the vat? When I asked the HMRC they said if I bought anything in my name then it would automatically count as DIY (HUH?) and then I couldn't claim the vat back.
Thanks,
BatCat

JasonLVC

BatCat wrote: »

Hi Folks,
Has anyone ever claimed a reduced VAT rate for renovating a house that has been unoccupied for over 2 years?
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_CL_000513&propertyType=document#P843_80380

You can only reduced-rate the renovation or alteration if, in the 2 years immediately before you start your work, the qualifying residential premises have not been lived in.

The reduced VAT rate is 5%.

Our builders aren't VAT registered (small firm) but the materials they are using on the house obviously have full VAT added on. We've also bought a couple of things like doors and are going to need services that are also charging full VAT. I called HMRC and they kept referring me to their website and said my builder would know how to sort it, but as my builder is not VAT registered they don't know.

Thanks,
BatCat

The reduced rate of 5% is applied only to 'services' relating to the renovation of a previously empty dwelling, renovation/repair/building work are all services.

Buying doors from B&Q is a supply of goods, not services.

The retailer selling goods doesn't know what you are doing with the goods you buy and if everyone said "oh, I'm repairing an old house more than 2 years old" then everyone gets 5%. It doesn't work like that. The onus is on the contractor, not the builders merchant.

What happens is the contractor(s) you engage to do your repair/extension works, THEY buy in the goods from B&Q or wherever and pay 17.5% to the shop and then they provide you with a service and they charge you 5% VAT for their service (which consists of goods and labour). They can reclaim the 17.5% charged to them when they bought he goods and so they aren't out of pocket and you get a cheaper job.

Using a non-VAT registered contractor means you cannot avail yourself of the reduced rate of VAT, nor can you reclaim yourself - you can only reclaim VAT if you are VAT registered or under the self-build DIY scheme.

The DIY scheme is designed only for the new builds OR the conversion of commercial property into a dwelling (ie, shop into home) OR for renovating an empty dwelling....provided it has been empty for more than 10 years. If you meet that criteras then you can make a self-build DIY claim.

Back on topic, reduced rate is charged by the supplier to you. You cannot reclaim it yourself from HMRC and as you've found out, HMRC are about as useful as a chilli -flavoured lollipop. If you have more than one contractor on the job, those that are VAT registered should reduce rate the works that are eligible.

WillowCat

JasonLVC is absolutely spot on.

Unlike building a new house, converting from another use, or renovating a house that has been empty for more than ten years, renovating one that has been empty for over two years is only eligible for the reduced VAT if you use a VAT registered installer.

I'm doing this at the moment - like you my builder is not VAT registered so I get no help there, but I have used two different window companies, a damp/timber treatment company, an electrician, and my plumber is due to start next month, all of whom are VAT registered.

In every case they had not heard of this relief! I had to e-mail links to VAT notice 708 and explain to them what it was all about. Unlike you, I did find the VAT helpline quite helpful (I wasn't sure if I could get the relief from multiple contractors until I asked them).

I also contacted the 'empty homes officer' at my local council, and she sent a letter confirming that the house had been empty since a certain date, and I gave a copy of this letter to each contractor. This is the 'certificate' that is mentioned in the legislation.

BatCat

Willowcat and Jason LVC
Thank you so much for posting. That is just the clarification I needed. This something definitely worth pursuing and I have a few vat registered contractors who will be doing work on the house (windows, electrical company etc.). Fantastic!
Thank you.
BatCat

BatCat

Hi Folks,
Just one last question...
can I claim this retrospectively? We had some work done on the house by vat registered companies before this lot of builders moved in: damp proof course, boiler installation etc.
Thanks,
BatCat

JasonLVC

BatCat wrote: »

Hi Folks,
Just one last question...
can I claim this retrospectively? We had some work done on the house by vat registered companies before this lot of builders moved in: damp proof course, boiler installation etc.
Thanks,
BatCat

You cannot reclaim any VAT from HMRC unless you are VAT registered or it is a self-build DIY claim.
What you can do, is go back to the original contractor/subby and explain to them that their services should have been at the reduced rate and ask them to issue a credit note for the VAT they overcharged you.

They'll get back from HMRC the VAT they originally paid over to HMRC (which came from you) and they can then repay this to you, so they are not in any loss position. The only thing maybe will be that the contractor will only refund you once they've got the cashback from HMRC and if they submit quarterly VAT returns it means you may have to wait a few months - but that's not a big problem.

The bigger problem is that many contractors just don't understand the rules - as you've witnessed yourself, and even HMRC can't get it right, so you may need to convince the contractor all these months later on that they were wrong first time around.

Show them Notice 708 (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_CL_000513&propertyType=document) and head over to Section 8 and 8.4 in particular....but if the contractor doesn't want to play ball with you, then you're pretty much stuck I'm afraid....which is why one should always be nice to builders;)

BatCat

Thank you Jason LVC. That is extremely helpful!!!

robgeraghty123

I realise this discussion was a while ago but wondered if you could help me in how to prove that I house has been unoccuppied for 2 years.

I bought the house in question in July 2010 and I know it has been unoccuppied since then. However I need to prove that it was unoccuppied since May 2009 in order to start work in May 2011 and to apply the reduced rate of VAT.

In the guidance it says to speak to utilities companies and council tax but they won't tell me anything about the house before I purchased it and say that they can't due to data protection.

The empty housing officer has no record of the house because it wasn't causing a problem and therefore wasn't reported as being empty. So my question is how do I prove that the house has been unoccuppied since May 2009?

from Electoral role there is nobody registered in 2009, 2010 and 2011 and I have a death certificate of the person who was registered there in 2008. Do you reckon that this is getting to be enough proof?

Any thoughts would be really welcome!!

Thanks

Rob