VAT relief on empty house?

johnboyinsole

Hi All,

I'm just about to get the keys to my first house and start improving it. I've read on HMRC website and somewhere else that any VATable work charged at full 20% rate for most house improvements can be reduced to 5% VAT if a house has been empty for 2 years or more. It's an old house by the way not a new build. I've had confirmation from the council that this house has been empty for just over 3 years.
Just wanted to know if any else has been in a similar situation and what their experience was like, e.g. do you have to claim the VAT back, how did you prove empty house to HMRC, what kind of things are covered as reduced rate, etc etc..

Thanks

xylophone

http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm
Is this what you are looking for?

Thrugelmir

Are you a business?

johnboyinsole

Hi, thanks for the replies and the link.
Just to clarify, I am not a business or renovating to sell, just a first time homeowner.
From looking at the guidance of HMRC, it seems that this applies to the actual business/contractor doing the work and not the home owner (of which I am the latter).
Therefore do you think it seems that I should ask the contractor to bill be for the reduced rate, or let them charge full rate and then claim back from HMRC?
I'm pretty confident I am eligible for the reduced rate according to section 8 of the HMRC notice but it's the procedure of how to go about it that I'm not so sure of.

pararct

You would need to be registered for VAT and only a business can do that.
VAT is paid by the consumer, the end user is another description.

A contractor would pay VAT on the goods they buy in to do a job and then charge it out again on the service(s) they provide. The difference ( or lack of it in some situations) is what is paid to or claimed back from the revenue.
You should ensure your preferred contractor is VAT registered and is aware of the tax allowances available. This would normally be part of your negotiation in awarding the work.

johnboyinsole

Thank you for the advice, I shall do that.

Looby_Lou

You need to make sure that the people you use are registered for VAT. We used the scheme when we renovated our house. The biggest problem was that so few people knew about the scheme, we made sure that we talked before we organised the work giving people a chance to talk to their accountants. Unfortunatly it doesn't work on stuff that you buy for yourself. We talked to the empty homes officer at the council who gave us a letter saying the house had been empty (we gave him previous owners name) and also an information sheet about the scheme to give to our contractors.

johnboyinsole

Looby_Lou thanks for sharing your experience. I have already emailed the empty housing officer to send me proof.
What kind of things were covered by the reduced rate? Is it both materials AND labour? Does it include central heating installation too do you think?

GDB2222

Your builder, assuming that he is VAT registered, needs to charge VAT on all the work that he does. So, if he needs to receive £10,000 for the work and it is standard rate work, he needs to add 20% onto this £10,000 for VAT, and you will get a bill for £12,000. (He then pays the extra £2000 to the government.)

Certain types of work attract a nil VAT rate or a reduced rate. In your case, your bill should be subject to a 5% VAT rate, provided that your property qualifies for that. So, if your builder needs to receive £10,000 for the work and it qualifies for the reduced rate of VAT, you should get a bill for £10,500. (The builder then pays the extra £500 to the government.)

You need to check the VAT guide that is relevant to this type of work, which you can find here:
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_CL_000513&propertyType=document#P806_77179

in case that link does not work, you need to find VAT notice 708. The relevant part of the VAT notice is section 8. this tells you the conditions that need to be met so that the reduced rate applies, and it also tells you what work is covered by the reduced rate. the reduced rate applies to both materials and labour – effectively, it applies to the whole bill that you get from the builder that relates to the qualifying work. If the builder does both qualifying and nonqualifying work, the 2 parts are subject to different rates of VAT.



Of course, if you do the work yourself or you hire a small builder who is not VAT registered, none of this applies.

johnboyinsole

GDB2222 thank you for this. I have checked the notice over and I'm pretty sure that I qualify. The only clause I can find that may catch me out is if I hire someone who subcontracts the work and therefore I wouldn't be able to benefit from the reduced rate. The rest of it seems relatively straight forward (as far as that is possible with HMRC!) so the next challenge is to make sure any VAT registered tradesmen I use know about this.