VAT reclaim - the difference between a self built house and a renovated house?

Furts

A different question to my post earlier today.

Viewed from the perspective of a private individual/consumer and not a builder or developer;

Consider a house that has been condemned as structurally unsound and to have no value. That is, repairs would be so expensive the local authority deem the house to be worth only the value of the land it is sat upon. The council tax band has been reset to reflect this. It is moved from band D to C as it deteriorates (this was backdated for a period of ten years). Then it gets re-banded to band A. The family living in it move out to temporary accommodation and take on a self build on their home.

This house had the front and both ends largely demolished, internal walls removed, ceilings and floors taken out, new stairs, roof pealed back, chimney rebuilt etc. It was then repaired to look like the original house but also enlarged and extended. So new wiring, plumbing, kitchen, floors etc.

The end result would look little like the original house, but would incorporate the style of it and the the back wall - this largely hidden from view. Visitors and passers by believe it is a new home. Those with an eye for construction know where to look for the joints.

One then wonders is this a new house? Hence a VAT reclaim could be made. Or is it an extension and renovation? Hence no reclaim can be made.

Has anyone come across a similar situation? What suggestions can you offer?

Many thanks in advance!

jkpd

20% vat,if the house was empty for two years then 5%, if you are not vat registred and you reclaim on a new build it has to be backed with PP application no etc, so no you can't fool the vat man!

jkpd

Why was the house not re-built? is it listed?

JasonLVC

http://www.hmrc.gov.uk/forms/vat431nb-notes.pdf should help you, generally you need to demolish at least two sides of the old property before HMRC will recognise it as a "new" property.

Quote:
Is the property that you have built a new build?

A new build is a building that has been constructed from scratch. In general, unlike a conversion, it will not incorporate any part of an existing building. This means that where a building is constructed on the site of a pre-existing building it will not incorporate any part of the former building above ground level.

So if you are constructing your new house on the site of a former building your claim will not be eligible unless:

• you have demolished the pre-existing building to ground level (you may retain cellars, basement and the ‘slab’ at ground level), or the new building retains no more than one façade (two on a corner site) of the pre-existing building so long as the façade is being retained as an explicit condition in your Planning Permission.

There are other situations where you can claim for a new build (even though it may incorporate part of a pre-existing building such as party walls) and you have either constructed:


• a semi-detached building, a terraced building where the existing house in a terraced row is completely demolished (except for a façade that is being retained because it is explicitly required by statutory planning consent) and the new house ‘infills’ the space where it once stood, or an enlargement or extension of an existing building that creates an additional dwelling providing that the additional dwelling is contained entirely within the area of the extension or enlargement.

So to come back to your query, you state the front and 2x sides were "largely" demolished but you have to be precise (not to me, but when deciding if you have a claim or not). If those sides were not raised to the ground and then rebuilt HMRC may form the view this is just a renovation, not a new build. The plans and PP will show whether the external walls were demolished fully or not. It is one of those cases where the VAT should have been considered before the job started so you could design it around the VAT refund (ie, demolish the whole wall not just partially would create a VAT refund opportunity whereas retaining part of the old wall would not).

HMRC have these strict definitions to stop people treating conversions and extensions as 'new', however, VAT rules tend to be rigid whereas house design is incredibly inventive and so it is still worth talking to HMRC with regard a claim becuase your situation is likely unique and may therefore fit in around the gaps in the law.

Furts

jkpd wrote: »

Why was the house not re-built? is it listed?

Unfortunately the owners could not reach an agreement with the Planning Department.

The property is not listed and is built in an area that was green fields until the late eighties/early nineties. So it is relatively new for a house.

Furts

JasonLVC wrote: »

http://www.hmrc.gov.uk/forms/vat431nb-notes.pdf should help you, generally you need to demolish at least two sides of the old property before HMRC will recognise it as a "new" property.

Quote:
Is the property that you have built a new build?

A new build is a building that has been constructed from scratch. In general, unlike a conversion, it will not incorporate any part of an existing building. This means that where a building is constructed on the site of a pre-existing building it will not incorporate any part of the former building above ground level.

So if you are constructing your new house on the site of a former building your claim will not be eligible unless:

• you have demolished the pre-existing building to ground level (you may retain cellars, basement and the ‘slab’ at ground level), or the new building retains no more than one façade (two on a corner site) of the pre-existing building so long as the façade is being retained as an explicit condition in your Planning Permission.

There are other situations where you can claim for a new build (even though it may incorporate part of a pre-existing building such as party walls) and you have either constructed:


• a semi-detached building, a terraced building where the existing house in a terraced row is completely demolished (except for a façade that is being retained because it is explicitly required by statutory planning consent) and the new house ‘infills’ the space where it once stood, or an enlargement or extension of an existing building that creates an additional dwelling providing that the additional dwelling is contained entirely within the area of the extension or enlargement.

So to come back to your query, you state the front and 2x sides were "largely" demolished but you have to be precise (not to me, but when deciding if you have a claim or not). If those sides were not raised to the ground and then rebuilt HMRC may form the view this is just a renovation, not a new build. The plans and PP will show whether the external walls were demolished fully or not. It is one of those cases where the VAT should have been considered before the job started so you could design it around the VAT refund (ie, demolish the whole wall not just partially would create a VAT refund opportunity whereas retaining part of the old wall would not).

HMRC have these strict definitions to stop people treating conversions and extensions as 'new', however, VAT rules tend to be rigid whereas house design is incredibly inventive and so it is still worth talking to HMRC with regard a claim becuase your situation is likely unique and may therefore fit in around the gaps in the law.

An excellent post. Hindsight is a wonderful thing!

In essence when work commenced there was a contingency fund to form a buffer on costs. However, as is often the case, when opening up and investigations were ongoing more and more problems came to light. More demolition and remedial works were undertaken than was originally forecast. It is intended to try for a re- claim but I am quoting odds on the outcome.