VAT on conversions

AlisonHarrison

I have just read something which says "VAT is charged at the reduced rate of 5% on the supply of services and building materials for the conversion of non residential property into a number of different dwellings"
I realise that if a developer was converting a property into a number of different dwellings, then he could get a subcontractor to charge VAT at 5%, but what about building materials. How would you get, say B&Q to change their invoice at the till to charge only 5%?

chrismac1

You wouldn't. The 5% is for when the builder invoices the owner of the property.

AlisonHarrison

Many thanks for this. Its becoming clearer now.
So the builder invoices the owner of the building for VAT at 5%. The builder reclaims the 20% himself. If the builder uses subbies, do they charge the builder 5% or 20%?

DigForVictory

See VAT Notice 708, 'Buildings and construction'?
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_CL_000513&propertyType=document

That said, unless you set up a trade account with B&Q and show that you are working on a qualifying property, I still can't see how they could know what you are buying is for that specific project.

JasonLVC

The reduced rate applies to the "services related to the conversion of a property", the key word is services.

A supply of bricks on their own is a supply of goods so standard rated. Only when the bricks are put up by a builder is there a service and it is that service which is reduced rated.

Any goods the builder uses to provide his service of building can be charged onto customer at reduced rate as well, hence if the builder buys goods and installs them it'll be reduced rated. if you buy goods yourself and give to builder, the goods are standard rated and the builders labour for fitting would be reduced rated.