reclaiming tax... at least some..

[glayzell]

Hi all, doubt anyone will remember any of my escapades, but i am finally there. I bought a g2 listed georgan semi in 2005 and then set about restoring and extending it. it has taken 6 years, and whilst not totally finished, i have been informed my completion certificate for the extension in in the post.

So i understand that i cant now no longer reclaim the vat on the alterations to the building thanks to some changes last october.

Does anyone know any other way of relieving the tax man? i read something about still being able to reclaim the vat if the house was empty for 10 years, which it was, but how would i prove that? and would that be 10 years from the last time it was lived in until completion certificate issued or from the time empty until i started paying council tax? I was exempt for a while, but then had to start paying it, even though it was still empty.

this could be worth ££££'s to me, more specifically, i had borrowed some money of my parents to progress the works a while back and we all thought we would be able to reclaim the vat and then i could pay them back......

any ideas would be very welcome.

 

[Flyfisher]

Firstly, let me state that I'm not a tax expert by any means. However, I can make some comments based on my own experience of VAT during works to our G2* property. Unfortunately, I don't think it is good news for the situation you have described.

The first problem is "reclaiming tax". My understanding is that there is no mechanism to reclaim VAT on any works to listed buildings. It is true that alterations to listed buildings are exempt from VAT but, in practice, this means that such works are 'zero-rated' and thus VAT is 'charged' at 0%. Thus your contractors' invoice will not include any element of VAT, which is how you avoid paying it.

The recommended process is to discuss the matter with the contractors at the start of the job. Explain to them that the alterations are VAT-exempt and get their confirmation that they will not include VAT on their invoice. In my experience the contractors required a copy of the LBC, which effectively 'proves' that the works are alterations (otherwise why would you need consent?), to satisfy their accountant/auditor that there is no requirement to add VAT to the invoice for the job.

This procedure has worked for me with three different contractors with no problems.

However, for all the work I have done myself, I have not been able to avoid paying VAT on all the materials I have purchased, even though they were used for approved alterations, and I know of no mechanism whereby I can claim back the VAT I've had to pay.

I'd love to be proved wrong on this (because I'd be the first in the queue at the VAT office with files full of receipts!) but I fear you will not be able to reclaim the VAT you've already paid.

I've less experience about the "10 years empty" rule, if any, so that might be worth pursuing further. However, regarding 'proof' of being empty, even if you are paying council tax while it is empty I presume that this would be at a discounted rate, in which case your council would have a record of this.

Our house is treated as two dwellings for the purposes of council tax (because part of it used to be rented out). We pay full council tax on the occupied part but only have to pay 50% on the unoccupied part (which is effectively uninhabitable as it has no kitchen or heating). Twice a year, the council send someone out to verify that it is empty and our council tax bill clearly shows the discount and the reason. I think it would be reasonable to assume that the council's record would be acceptable proof of the house being empty.

 

[Penners]

I entirely agree with everything that Flyfisher has said, above, despite being - like him - no kind of tax expert.

The rule about not reclaiming VAT goes back farther than last October. About four years ago I tried to reclaim VAT on materials that I had bought for some DIY listed building alterations. No chance.

 

[AMc]

I'm not an accountant and this is not financial advice
I have looked into this before - generally reclaiming paid VAT is a lost cause.
You need to get it correctly rated at the point of invoice with one exception I know of (see below).
I think your listing may make no difference at all in this case if you've already paid the VAT even on approved alternations.

I discovered that my split property - I have 3 house numbers - didn't qualify for reduced rating because half had been unoccupied for 10 years BUT I was able to get VAT applied at a reduced rate because I was changing the number of dwellings.

Conversions
If you are converting a dwelling into a different number of dwellings - combining 2 houses into one or splitting 1 into more than 1 then the work associated with the change in dwellings is reduced rated to 5% on building materials fixed to the house e.g. kitchens, bathrooms, plasterboard and paint and labour. Hire charges are full rate. To get this you have to convince the VAT registered builder that you qualify and get them to invoice at the right rate. They will only be able to do this on things installed - you can't ask them to buy you a washing machine & sofa at that rate nor provide you with a pallet of bricks and not build a wall with them. This relies entirely on your working out the details with the VAT registered builder before you begin as they are very unlikely to want to argue with the tax man about invoicing at the wrong rate - this is money they pass directly to HMRC so they have no incentive at all to re-examine an old invoice.

Self Building
There is a provision for reclaiming VAT as a self builder for new residential conversion and new self builds which is designed to level the playing field for self builders against commercial builders who pay no VAT on these projects. You can't do this more than once for the same project so it's vital you're done before you apply - you pay the VAT, submit the claim with receipts and get the money back from HMRC.

Empty and derelict properties
There is/was a provision for reduced rating on bringing a derelict residential property back into use but the rules changes a while back from a sliding scale to a standard requirement for proof of the property being empty. I looked into this but wasn't able to work out the rules.

The details of all the rules on VAT on building are in Notice 708 - print it, highlight it and inwardly digest this. The HMRC helpline can explain the document but won't make any binding commitment on if your project qualifies for any relief and they may provide you with inaccurate interpretation of the documents - they did with me thinking that because I wasn't building a care home I wasn't eligible.
http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm#5

If you look in the back of the self build and home renovation magazines you'll find adverts for VAT consultants who specialise in VAT reclaims for self builders.(e.g. http://www.homebuilding.co.uk/directory/search?filter1=&filter0=&filter2=93&filter3=**ALL**&x=44&y=14). It seems the directory listings on this site don't have any which is a pity.
I would call a few and gauge if they think there is a mechanism to get some of what you paid back before you hand over any money to any of them to submit a claim. I would imagine it would be worth paying a commission to get the paperwork done properly if there is grounds for a refund YMMV.