VAT ON RENOVATION WORK- 5% VAT
If a dwelling has been empty for two years or more the renovation work can be carried out at the reduced VAT rate of 5%.
1. Where a dwelling has been continuously empty for two years immediately before the work starts the contractor can charge 5% for the supply and fit of building materials in the course of the renovation. It is recommended that proof is obtained that the property has been empty for the required time from the local authority or utility companies. Illegal occupation by squatters can be ignored.
2. The more complicated situation arises from a VAT point of view where the property is lived in whilst the work is being done. Contractors who have already started their works can continue to apply the reduced rate even if the property begins to be occupied while the work is ongoing. However, if other contractors begin their work after occupation takes place, for their work the main condition will not be met, so a further condition needs to be considered. The reduced-rate can be applied provided the dwelling has been continuously empty in the two years immediately before purchase, which is a different test to the one in No.1 above. There are however, three further conditions to satisfy:
· No renovation or alteration had been carried out in the two years prior to the current occupier acquiring the dwelling (minor works that were necessary to keep the dwelling dry and secure can be ignored);
· the services are supplied to the occupier (so subcontractors must standard-rate to the main contractor ), and
· the renovation work must take place within one year of the occupier acquiring the dwelling.
This will arise where a client buys a house which has been empty for two years, the client moves in and the works are carried out in the year following the purchase.
Listed building- Zero rating
The zero-rate for approved alterations of listed dwellings was removed in October 2012 so that is no longer a consideration. There are instances where a the sale of a substantially renovated building can be zero rated.
Conversion of a dwelling
There is also a 5% reduced VAT rate that applies on conversion of a dwelling other than the above, meaning the two year empty period is not relevant. This will apply to conversion work on a dwelling where the number of rooms is being increased or decreased.
109B High Street
Herts HP1 3AH
Tel: 01442 242491
If you have an enquiry or wish to make an appointment please contact us:
01442 24 24 91