VAT - Listed Building - Doing the work myself

[benmc]

Hi All

Just looking at the VAT rules on alterations on Listed Buildings. Everyone always talks about the builder only charging VAT at 0% rate.

But what happens if you perform the work yourself? ie Can you claim the VAT back on the materials you purchase for an alteration?

regards
Ben

 

[Flyfisher]

I'm in the same position as you and I don't believe it's possible to claim back anything if you do the work yourself :twisted:

Actually, it's not even that simple to claim the VAT back via a builder. I've read that everything has to be agreed (between C&E and the builder) before any work is done and you can expect scrutiny regarding what's allowable and what's not allowable.

The plus side of doing the work yourself, though, is that you'll save so much that you'll be able to afford the VAT on the materials you buy, annoying though it may be to have to pay it!

 

[Penners]

When I started the current project of alterations to our house (listed Grade II) I phoned HMRC to ask whether, as I'm doing all the work myself, I could claim back the VAT paid on materials.

I got a flat, unequivocal "no". The only way that you can get away without paying VAT is:-

* If the work has LBC (which mine has)
* If the work is alterations (repairs don't qualify - crazy, but that's the rule)
* If a VAT-registered builder does the work and then invoices you without charging VAT.

So you have to convince your builder that he is within his rights not to charge you VAT. Some builders are sufficiently experienced at listed building work to accede to this quite readily; others may be more of a problem. The point is that if the builder doesn't charge you VAT, and it subsequently transpires that he should have done so, he carries the can.

 

[Pford75]

Penners summary is quite correct. But, if the works are substantial, it may be worth creating your own Ltd company and VAT registering, and then effectively employing yourself.

Having spoken to my accountant regarding a similar (non property related problem myself), he advised that there is nothing to stop you doing this. You would however have to return a set of accounts for the trading year (probably all in, with VAT registration, I would imagine a cost in the region of £500-£1000). So, depends on the amount of work.

It is also much easier to get a trade account with various merchants/suppliers.....which invariably attracts a discount.

 

[Flyfisher]

Funny you should mention that. I had a similar conversation with an accountant friend but he thought such a plan would be risky because the company would have been formed purely for the purposes of avoiding tax and such arrangements, unless previously agreed with the taxman, are not allowed. Also, you'd have to show a 'sensible' set of accounts that included wages etc and these would be subject to employer NIC as well (about 11% I believe).

As for trade accounts, I haven't found it difficult to get a trade account without a limited company. Lots of builders must operate as sole traders so I don't think the various builders merchants care too much about only dealing with limited companies.

 

[Penners]

You also have to consider the risk that your property will then attract business rates, rather than domestic council tax.

 

[skier-hughes]

And also when you sell it captial gains tax, both on the proportion used as business premises.

 

[Flyfisher]

Surely you can register a company at your home address without having to actually use the property for business purposes?

What about business consultants who are self employed but always work at their customer's offices? Or, indeed, self-employed builders who would hardly work at home?

 

[Penners]

Fair point, but I'm not sure you'd get away with that in a situation where your business is the repair and renovation of the property that houses the business.

An interesting one....

 

[Flyfisher]

I agree, but then I don't think it would be acceptable in the first place due to the tax avoidance issue I mentioned.

I'm sure my accountant friend told me that recent changes to the tax laws made any tax avoidance schemes illegal, unless they were first agreed with the taxman! 'Scheme' in this context means any arrangement or transaction that is done purely to save tax.

On the face of it, that sounds so bizarre that I might have interpreted it incorrectly, but on the other hand it sounds like the sort of thing the government would do!

Any tax experts here that can confirm, correct or deny ?

 

[skier-hughes]

Surely you can register a company at your home address without having to actually use the property for business purposes?

What about business consultants who are self employed but always work at their customer's offices? Or, indeed, self-employed builders who would hardly work at home?

True, but where are you working from if you are a building company, you have to do the work from somewhere. Of course if you don't claim any expenditure for heating/lighting etc for your "business" premises then you won't get involved with capital gains/business rates.

Forgot about insurance, you have to inform your insurance company and your mortgage comapny if you have a registered office as your home, this may affect your premium, and it certainly affects the resale of your property, as it led to a 3 week delay with the sale of our previous home as it was discussed whether the couple were buying a home or a business premise.

Tax avoidance schemes don' neccessarily have to be ok'ed by the taxman, but at a later date if he rules that your scheme is not allowed then he can reclaim all the tax he thinks he should have, plus any interest/penalties etc. so it is best to discuss it first.

To be honest, for the sums involved in this sort of thing for the majority of householders it's not worth the hassle, when compared to the amount of work you'd need to put in.

Graham

 

[Pford75]

I'm sure my accountant friend told me that recent changes to the tax laws made any tax avoidance schemes illegal, unless they were first agreed with the taxman! 'Scheme' in this context means any arrangement or transaction that is done purely to save tax

This is correct - However, one way of approaching this is the liaibility and insurance route. On a previous project we employed various subcontractors and argued that we required the limitation of liability that came from having a company vs. employing them as individuals. We did seek approval from the IR in advance...they initially argued against, but agreed in the end.


As for 'registered offices' - I use my accountant's address for the registered company address. As Graham points out, this means I can't claim heating bills etc., but it also means that I don't have any capital gains liability.

I certainly wouldn't argue that this is worthwhile for most...but if your spend is GBP250k upwards, then it does make sense. We've even considered transferring our house to the company, pre-inheritance tax change proposals.

On accountants (speaking as ex-Price Waterhouse and ex-Ernst & Young)...there is very little black and white when it comes to what is 'allowed' and 'disallowed'.....different accountants are more 'aggressive' than others. It just comes down to your appetite for risk...you may get burnt..you may not...depends how much is at stake and whether you can afford to take that risk

 

[inwood]

All you need to know re: listed buildings and VAT is contained in the following VAT notice from HMRC.

http://customs.hmrc.gov.uk/channels...ertyType=document&columns=1&id=HMCE_CL_000513

Section 9 is probably most pertinant (and section 8 if you're doing work on a property classed as being 'empty residential - as mine was). Don't forget that you can also get some work rated at 5% as well as 0%.

It's a bit of a 'tome' but read through from the first section to work out which might apply, it's then (as far as anything is with VAT notices) fairly easy to follow.

I showed the builders the relevant sections when I got them to do work and they invoiced accordingly.

 

[Flyfisher]

The examples at 9.3.2 were interesting.

Replacement of rotten wooden windows with uPVC is repair/maintenance (VAT is payable) whereas replacement of uPVC with wooden windows for aesthetic windows is an alteration (VAT not payable).

 

[Moo]

Replacement of rotten wooden windows with uPVC is repair/maintenance (VAT is payable) whereas replacement of uPVC with wooden windows for aesthetic windows is an alteration (VAT not payable).

Hurrah! Hurrah! Hurrah!

 

[Essex]

We wrote to Customs and Excise describing the work we were doing and they replied with a letter saying what was and wasn't acceptable (whilst making it clear that it was the responsibility of the sub contractors) this letter was v helpful when talking to our subbies and enabled us to be VAT free for all the relevant work (apart from that we did ourselves)

 

[Carrie]

Essex, did it take long for Customs and Excise to reply? Thanks. Carrie

 

[skier-hughes]

If you check their web-site it will tell you how long they will take, as a maximum, to reply to you on different matters.

 

[Essex]

Carrie, from memory they replied in a couple of weeks