VAT on Grade II Listed Farmhouse uninhabited for 3 yrs

[oxalto]

A good number of people have been offering me advice on VAT relief, but I am really unclear as to what rate things may be charged at. My understanding is that any new work is 0% rated, any alterations are the same (what consitutes an alteration?) and "like for like" repairs are at the usual 20% rate. However the house has been unoccupied for over 3 years (over 4 years for one side) so would that mean that all work which would normally be 20% falls to 5% or not? Many of the repairs are not like for like as they are repairing damage doen by previous work using non-breatheable materials. Are these therefore alterations?

Clearly I need to ensure that all workmen know and agree to do the zero rating in advance, but if I am buying things myself at a building supplier, can I ask for VAT to be removed? Is it possible for a private individual to become VAT registered and is it worth bothering? How wide ranging is VAT relief? Can one expect to get a skip VAT free for all alteration and new work - it would seem only fair and consistent!

 

[skier-hughes]

No you can't ask for vat to be removed.
No you can't register for vat as an individual.
perhaps have a read thorugh HMRC's guidance notes

 

[MdB]

No you can't register for vat as an individual.

Technically not correct as I'm vat registered being self employed.

Unfortunately you can only claim for stuff associated with your trade and not for personal stuff. I would guess the only way you could wangle this is if you became self employed to do up old buildings. HMRC may take a dim view of this though.

 

[Flyfisher]

I'm not a tax or VAT expert by any means but I've read enough to know that this seems to be a very confusing area. So, I've taken the non-expert approach based on the following principles:

1. Alterations to a listed property are VAT-free. Repairs are not.
2. Alterations to a listed property requires LBC. Repairs do not.
3. Thus, any works requiring LBC are VAT-free. The CO decides what requires LBC.
4. Explain this to any contractors after agreeing the price for the works. Agree that they will not invoice you for VAT. Offer them a copy of the LBC for their, or their accountant's, files.

I don't know the technicalities but the above has worked for me on the few occasions that I've had contractors do some work on our house.

Unfortunately for those of us that do a lot of the work ourselves, there is no way (that I know of) to avoid paying VAT on the materials purchased for the work - but I'd love to be proved wrong about that.

 

[skier-hughes]

No you can't register for vat as an individual.

Technically not correct as I'm vat registered being self employed.

Unfortunately you can only claim for stuff associated with your trade and not for personal stuff. I would guess the only way you could wangle this is if you became self employed to do up old buildings. HMRC may take a dim view of this though.

Technically not correct

As you are not an individual, you are a business, be it only a one man business. Your business would be vat registered, not yourself. As you say, you can't reclaim vat on your personal purchases, only those made in connection with your work.

 

[oxalto]

I'm not a tax or VAT expert by any means but I've read enough to know that this seems to be a very confusing area. So, I've taken the non-expert approach based on the following principles:

1. Alterations to a listed property are VAT-free. Repairs are not.
2. Alterations to a listed property requires LBC. Repairs do not.
3. Thus, any works requiring LBC are VAT-free. The CO decides what requires LBC.
4. Explain this to any contractors after agreeing the price for the works. Agree that they will not invoice you for VAT. Offer them a copy of the LBC for their, or their accountant's, files.

I don't know the technicalities but the above has worked for me on the few occasions that I've had contractors do some work on our house.

Unfortunately for those of us that do a lot of the work ourselves, there is no way (that I know of) to avoid paying VAT on the materials purchased for the work - but I'd love to be proved wrong about that.

Thank you for this. This seems by far the most straight forward way of working. I had looked into the HMRC info but found it somewhat unclear. This is a much better rule of thumb and is backed up by good logic! I'm now really pleased that we bothered submitting absolutely everything that we wanted to do for LBC, on the advice of the CO!

 

[Penners]

1. Alterations to a listed property are VAT-free. Repairs are not.
2. Alterations to a listed property require LBC. Repairs do not.
3. Thus, any works requiring LBC are VAT-free. The CO decides what requires LBC.
4. Explain this to any contractors after agreeing the price for the works. Agree that they will not invoice you for VAT. Offer them a copy of the LBC for their, or their accountant's, files.

That looks spot-on, as I understand the regulations (I'm nothing like an expert either). If you're doing the work yourself, I suppose it would theoretically be possible to get yourself registered for VAT as a business, but you'd have to do VAT returns showing a trading status with input and output VAT.... in short, I don't see any way you could do it.

As a private individual, if you do the job yourself you cannot ask for your materials to be supplied free of VAT and you cannot reclaim VAT on purchased materials (I know - I've tried).

In short, the only way I can see you getting your VAT relief is to employ a VAT-registered builder and to persuade him/her not to charge you VAT. For this purpose it is essential that you can show the builder your LBC.

As regards the removal of modern materials and their replacement with traditional (eg: gypsum/lime plaster), I'm not sure whether that counts as a repair... unless of course the gypsum plaster should happen to be in a severely deteriorated condition. :wink:

 

[oxalto]

As regards the removal of modern materials and their replacement with traditional (eg: gypsum/lime plaster), I'm not sure whether that counts as a repair... unless of course the gypsum plaster should happen to be in a severely deteriorated condition. :wink:

Excellent plan, Penners!

 

[Flyfisher]

If you're doing the work yourself, I suppose it would theoretically be possible to get yourself registered for VAT as a business, but you'd have to do VAT returns showing a trading status with input and output VAT.... in short, I don't see any way you could do it.

I'm not entirely sure about this but I suspect that if you make such an arrangement solely for your own personal benefit then HMRC/Customs&Excise (or whoever it is these days) would probably disallow it on that very basis. Of course, if you set up as a business and also did work for paying customers then I doubt anyone would find out if you happened to use some 'spare' materials on your own property.

In short, I agree with Penners' own 'in short' assessment.

 

[Penners]

If you're doing the work yourself, I suppose it would theoretically be possible to get yourself registered for VAT as a business, but you'd have to do VAT returns showing a trading status with input and output VAT.... in short, I don't see any way you could do it.

I'm not entirely sure about this but I suspect that if you make such an arrangement solely for your own personal benefit then HMRC/Customs&Excise (or whoever it is these days) would probably disallow it on that very basis.

I reckon you're right, FF.

 

[skier-hughes]

Being in business you'd also have to do accounts, register with HMRC for PAYE, get insurance, and if you only had one client, you'd be taken as being employed rather than self employed, then there are a whole set of rules for building contractors.........................................

 

[AMc]

You could potentially set up and VAT register a business and become your own main contractor - however the expense and work involved in that might make it prohibitive - we decided not to do it.

Some people - builders etc. may point you at the HMRC notice that relates to self building new residential properties or conversion of non residential premises into dwellings. This requires you to pay VAT up front and reclaim it all at the end. This is unlikely to apply and once you've paid that VAT it will not be returned or reclaimed.

Reading your original post it seems like you may be changing the number of residential units?
Our house was divided in two before we bought it. Half the house had been continuously occupied so we were told by HMRC that we were not able to claim the reuse of derelict residential property 5% rating on reuniting the two halves of the house even though we could prove that the other half had been vacant for +10 years.

However when I read the rules carefully I noticed that you can claim reduced rate of 5% on changing the number of single household dwellings. This is usually used when turning a building into smaller units (e.g. bed sits and flats) but it also applies when reducing the number of units - in our case 2 into 1.
As we had a letter from building control confirming the house had been split into "two dwellings" years earlier I felt that our plans were in line with that reduction.


Notice 708 is important I recommend you print it, read it highlighting any bits that may apply then re-read it.
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000513&propertyType=document#P720_70359
Once you have worked your way though it compile a pack of the relevant extracts (not the whole 110+ pages) with a covering letter explaining which bits you need to apply to your work and why you think they apply. Make several copies as you'll need it more than once and it's a PITA to put together in a hurry.

I spoke at length with my main contractor, I printed and highlighted the relevant bits of 708 and he showed it to his accountants.
They ended up agreeing with me that changing the number of dwellings applied and they could rate materials and labour at 5%.
This only applies to materials and labour he supplied and items permanently fitted to the house - bricks, mortar, plaster, kitchens, bathrooms NOT carpets, curtains, furniture etc.
I also successfully convinced my glazing company and joinery company to apply the 5% rate providing them with the same documentation.
There were some suppliers who were not happy to apply the 5% rate as they weren't convinced they could do so.

You will not be able to get a reduction in VAT on hire so you'll pay the full 20% on skips, portaloos and specialist tool hire etc.
Things like saws and tapes and other 'consumable' tools shouldn't really be classed as building materials but may be lower rated by your contractor.

My experience with the HMRC helpline was that they were able to explain and illustrate notice 708 - but they weren't able to advise me on which parts may or may not apply to me. They were not able to make a definitive legal statement that one rating or another rating would apply and I was given contradicting advice on two calls.
In the end the most helpful thing the said to me was words to the effect that :
VAT is a self certified tax applied by the VAT registered business, it is the VAT registered businesses obligation to determine and apply the correct rating, HMRC will only become involved if they believe that there has been a deliberate attempt to apply the wrong rating during a VAT audit or a criminal investigation.

I gave some suppliers a written assurance that should they be found to have misapplied the rules and become liable for VAT at 15% (as was) then I would work to reimburse them.

Remember the VAT is applied by the firm then passed to HMRC - they see no benefit from it and have no interest in over charging it, BUT they do hold liability for applying the wrong rating and could end up in trouble if they appear to be deliberately under invoicing it.
Also remember that once you've paid an invoice with the wrong VAT rating on it then you will very lucky to get it back. Most company accounts will ring fnce the money and they will be loathed to explain changes - only pay invoices at the correct rating and make sure your contractors understand that prompt, accurate billing will result in prompt payment.

FWIW my main contractor applied a 10% markup on all materials and contractors they supplied. But they applied the 5% rate of VAT so I was better off than if I'd paid the retail rate of 15% (at the time). Your builder should also be able to get better prices on common materials than you would manage if you walked into the builders merchant so it should make sense to order though them. Somethings we bought retail and paid full VAT on simply because it was too complex to get them purchased through the main contractor.

I would recommend picking up one of the home building magazines - I liked "Homebuilding and Renovating" and reading the stuff in the back about the various ways to manage and run a self build. You will save at least the £4 cover price in the long run!

WARNING - I am not an accountant and this is information not legal advice!

 

[Penners]

Wow! Where else would you get all that advice free of charge?!

 

[oxalto]

That's incredibly helpful AMc, thank you so much!

 

[AMc]

You're very welcome - I learnt this the hard way but there's no need for everyone to have that pain.
The main thing is to convince yourself and your builder which rules apply to which work and make sure your builder bills you carefully for work that is 0% and 5% and 20% rated - ideally under separate invoices. It will cause them a bit more admin, but should save you a lot of money. We obviously saved around 10% of our £180K spend but now VAT is 5% higher!

On a side note insulation and 'green' heating (wood boilers, heat pumps) are 5% rated.