5% VAT on renovating residential property

valmiki

First of all Merry Xmas! It’s 2am and I can’t sleep as my mind is working overtime...

Basically, bought a house to refurbish and move into back in October 2016. It was being sold by the son after his mother passed away in April 2016.

The house has been unoccupied since this period.

Plans were drawn up to extend the property and planning permission was passed. Cue months passed whilst structural engineers did their work.

Early this month I paid to have a rear extension demolished, since it would help with ascertaining structural integrity of the house.

Now, come the new year, the plan is to tender out to a vat-registered builder to build the new extension, loft conversion and renovate the building.

Having read VAT notice 708 - 8. “Reduced-rating the renovation or alteration of empty residential premises” can I ask the contractor to supply with 5% vat if work doesn’t commence before April 2018? As it will then have been unoccupied for 2 years. I’m going to be contacting local council offices whom I am sure will be able to confirm the exact date that the house become unoccupied. I can also get statements from the son and utility bills showing no usage.

Reading into the VAT notice I’m not sure whether my having already demolished the rear extension would mean that I can or can’t claim the reduced vat?

If anyone has any thoughts please let me know! Thanks so much!

valmiki
Ps. Merry Xmas! I’m up in 5 hours to start the veg

Tom99

[FONT=Verdana, sans-serif]The requirements do not seem to bar you having carried out work during the 2 years of non-occupational so it does not look like your demolition work counts against you.[/FONT]
[FONT=Verdana, sans-serif]It would seem the work needs to be apportioned into that which is allowed at 5% and that which is not.[/FONT]

valmiki

Thanks so much for replying, looks like I should be ok 👍

Merry Xmas!

valmiki

Tom99

[FONT=Verdana, sans-serif]I would be inclined not to mention 5% VAT when tendering but only later.[/FONT]
[FONT=Verdana, sans-serif]That way you may find a contractor who does not want to play ball with the 5% VAT business is still the cheapest even at the full VAT rate.[/FONT]

valmiki

Hi Tom99, Good idea! If you have any more tips please let me know ��

Valmiki

J_B

Are you sure it's two years?

We are doing one currently, but that was empty for 10 years.

Mrs B has just gone in the shower so I have a minute to reply, but will maybe investigate more during the week ...

valmiki

Hello mate, 10 years and it’s zero rated, 2 years and it’s at 5% ��

AuntyCat

The 5% rate would apply if the house has been empty for two years when the work starts. The empty property officer at the council will provide a letter which you can give to the builder - he can then charge 5% VAT.
Make sure it's not lived in at the time the building work starts - para 8.3.4 in the Vat Notice.


Not sure where you have got the zero rating if its been empty for 10 years valmiki? I can't see that aanywhere.

valmiki

Hi Auntycat - I'll be the first to admit I'm not an expert! Having said that I had done a quick google on 'property renovation 10 years zero vat' and came back with a load of results especially from council websites such as Cornwall Council:

https://www.cornwall.gov.uk/media/20936862/2016-07-ep-summary-leaflet.pdf

"VAT concessions
(HM Revenue and Customs)
Renovation of residential properties which have been empty for 2 years or more is subject to reduced VAT of 5% on eligible works; while for those which have been empty for 10 years or more a zero rate of VAT applies. We can help with supporting evidence, about the length of time a property has been empty, for inclusion with applications to HMRC. Please refer to our separate VAT lea et for more details about potential savings. "

Something to do with properties unoccupied for more than 10 years are classed the same as non-residential?

Happy to stand corrected though!

Merry Xmas
valmiki

AuntyCat

Just to update -

If the residential property has been empty for 10 years or more -

This is part of the DIY house builders scheme. The owner or a family member must be intending to live in the completed property - not for a property to be resold. Your builder can charge 5% and the materials will be standard rated - the VAT can be reclaimed through the DIY house builders scheme. Even if you are VAT registered as a business, it can't be reclaimed through your VAT return.