Claiming back VAT When Converting Buildings into Homes

The Facts About Claiming Back VAT

When you convert a building that was not originally designed as a home so that it can be put to domestic use, there is a chance that you will be able to get back the VAT on some building materials and/or conversion services used.

This does not apply in every situation though, and there is strict criteria governing who qualifies and for what. If supplies or services used are already zero rated (or VAT free) or supplied at a reduced 5% rate, then you may not save much more than you already have.

If you are constructing new homes, completing partially constructed new homes or repurposing/converting non-residential property then you may qualify for some level of VAT refund under the scheme.

Repurposing a building means that the original structure must not have been used as a home (for at least ten years prior to the repurposing); this means that the property cannot have been occupied on any basis, including part-time, partial or occasional use. Squatting in the property illegally will not count as occupancy, and once building work has begun the premises may be occupied on a full-time basis.

A building being “finished” might include a property that has been purchased as just an empty shell, and you either fit it out yourself or employ someone to do this on your behalf. Buildings that are already complete at point of purchase, where you merely carryout additional work on it (like adding an extension or conservatory), will not qualify for the scheme.

If the building is new, then it must be entirely self-contained and purpose built as residential property if it is to be eligible for the scheme, which means that granny annexes are not suitable. Buildings developed expressly for business use are unlikely to be eligible, unless they are communal residential premises (like a charity building or care home).

There are a number of excluded parties that are not able to benefit from the scheme. These include speculative developers, landlords, B&B owners, schools or care homes that charge fees, as well as membership based clubs and societies. A person working from home might still be eligible for the scheme; provided that the main purpose of the property is residential (e.g. the occupant might use one room to work from as an office).

If you are not in the categories of ineligibility, then you should be able to qualify for the VAT back scheme (regardless of whether you undertake the construction work yourself or employ builders to do some or all of the work on your behalf).

Any goods claimed for under the scheme must be definable as “building materials” in accordance with HM Revenue and Customs’ definitions, so they must be integrated into the building/conversion in such a way as they cannot be removed (without using tools and/or damaging the materials or building in the process).

Items like fitted furniture, utilities installations and floor coverings are not covered by the definition. Materials obtained overseas must come with evidence of VAT being paid in addition to the documentation required to show importation procedure has been met.

**Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.

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