VAT Update – October 2015*
Some readers will be aware that there used to be a possibility of obtaining VAT relief on works done to their listed homes. That, sadly has now gone – the Chancellor cancelled it in 2012, but allowed a small amount of concessionary relief until 30 September 2015.
So what’s left, as regards VAT relief? In short, very little, unless you happen to fall within a small number of specific situations, all of which might give you the reduced VAT rate (5% VAT). These can only be provided by a VAT registered contractor doing work on your property. For completeness, though, it could be more than one contractor. (if you use several sub-contractors, they can all provide the relief.)
This can be applied in a number of situations but we would stress that there is a certain amount of small print involved in each category:
• Conversion of a non-residential property into a dwelling. This will apply to a typical barn conversion, or converting an office into a house; a chapel into a house; a pub into a house or similar.
• Where a domestic property has been empty for 2 years prior to work starting. You must be able to provide third party evidence, to convince a sceptical VAT man that no-one has lived in the property in the two years prior to the commencement of the work.
• A ‘changed number’ conversion. As the name suggests, this is where the number of residential units within a building has changed, either up or down. For instance, splitting a house into flats, or vice versa.
• Installation of energy saving materials. From draught-stripping windows, to loft or wall insulation; to full-blown solar/wind power installations and air/ground source heat pumps, the 5% VAT rate applies – but only on a supply and fit basis. One point to note is that if the insulation is part of a bigger job, the VAT rate applicable to that job will over-ride the 5% rate. For instance, a roof replacement would be liable to VAT at 20% in full, even if it was insulated at the same time.
There is a further relief that allows the home-owner to reclaim VAT from HMRC:
The “DIY HOUSEBUILDERS SCHEME”
The above title is a bit of a misnomer, as you don’t have to build a house, nor do you have to do all the work yourself. In the following scenarios, if you have paid VAT in the course of the building works, you can potentially claim it back from HMRC, but beware – there is a fair bit of small print.
• Building a new house from the ground up. This would normally involve building on a bare plot, but if you demolish an existing property down to foundation level and start again you will qualify. You can also qualify if you leave one wall of the existing property standing, but its retention would have to be at the insistence of the local authority. Likewise, with a corner plot (ie at a road junction) you can leave two walls standing. The claim would be restricted to a refund of 20% VAT on materials purchased direct. All building contractors should be zero rating their supplies of labour and materials in any event.
• Converting a non-residential building into a residential building. Once again, if a new stand-alone dwelling is created, you can make a claim for VAT spent out – either VAT charged by a contractor (labour and materials at 5% VAT) or for materials alone (20% VAT).
• Refurbishing a residential property that has been empty for more than 10 years. The claim would again be for the VAT spent out – either charged by a contractor (labour and materials at 5% VAT) or for materials alone (20% VAT).
In all cases, the one-off claim must be made within 3 months of completion of the work but it is important to seek advice from the start of the project. NB: ‘completion’ is defined as the issue of the Certificate of Completion issued by the local authority, under the building regulations regime.
As you would expect, this is a brief summary of the situation and we would recommend taking advice on the precise details of your project. We would recommend taking the advice of a VAT adviser and we will be happy to provide details of specialists in various parts of the country, if you wish.