vat rules on period property

[norfolk house rob]

Hi every body,
It's Rob again.
I would be gratefull if anyone can advise me on the basic rules on VAT on owning a period property, and how I go about claiming if this is possible.

 

[MattJ]

Generally the following two statements are true (except when they're not)

Repairs or maintenance are rated normally for VAT.

Work that requires and has received listed building consent and is considered an alteration is zero rated for VAT, provided that a VAT registered contractor performs the work.

Some contractors won't believe the zero rating and won't take on the work (I speak from experience) and who can blame them, as there's no document from the VAT office or the CO that will demonstrate that a particular piece of work is zero rated. The contractor has to gamble that the work is zero rated based on their or their accountants experience. My plumber would only take the work on the condition that I signed up to pay the VAT retrospectively if a VAT inspector disagreed and asked for VAT to be paid.

But there are some real strange catches. Not everything that requires listed building consent is an alteration (e.g. repair a roof with a different tile might require LBC, but might not be considered an alteration) and then again some works can be alterations and repair/maintenance simultaneously (so the VAT guidance says). Get a specialist consultants advice, but there will still be gray areas.

If you want to get into the Revenue & Customs rules yourself, Google for "V1-8A Construction" and read the 16 pages of section 9 for the basic rules and section 10 on what's an alteration and what's a repair.

As an example of a contradiction to my first two rules, I claimed my central heating was zero rated, as previously the heating was one radiator from a back boiler and therefore my CH was the first time installation of central heating (which is zero rated), however I didn't require listed building consent for the central heating as it didn't alter any historical fabric of the building.

Hope that ramble was of some help.

Matt

 

[Anne]

This is a completely crazy rule but none the less it's how it works. They want to encourage people to repair old buildings properly and yet if I managed to get consent to change my windows to UPVC I wouldn't have to pay vat but if I want to repair my old windows I do. :? They need to stop spending money writing reports on these issues and do something to encourage owners to do what's right for their buildings.
(exits soapbox)
sorry couldn't help myself
congratulation on your property!

 

[skier-hughes]

Here is the vat notice

Graham

 

[norfolk house rob]

thank you to all that have tried to help in my quest for rules on VAT as regaurds to listed buildings, I am in complete agreement that these rules instead of encouraging people to look after old period propertys a load of money is wasted at goverment level instead of being invested in such propertys.
I think I will just carry on as before, it will just take a little longer to finish the project. thanks once again for your help.

 

[Penners]

NHR

Just a PS to previous responses: I enquired of the tax authorities whether I could claim the VAT back on materials that I buy for a DIY alteration to a listed building. The answer was an absolutely unequivocal No!

Others have posted on the PPUK forum in the past that this is possible, but that was the result of my research.

David

 

[MattJ]

It's definitely not possible to claim VAT on materials. I believe someone did post here that they had done that, but it turned out the building had been unoccupied for more than 10 years in which case the VAT is reclaimable on the work, similarly to the way that self-builders can claim VAT back.

Matt

 

[Jon Maine]

Yes, vat on inhabited listed buildings is normally only zero rated if it is an alteration for which listed building consent was required.

Here is an article on vat which may help;

When dealing with a listed building and exploring the VAT position in my experience it is common to not ask the correct questions. Do not be blinkered and just describe the building as a listed building give as much information as you can about your exact position when calling the HMRC helpline. Some of the observations below may guide you in the right direction. They will be able to send out leaflets which in turn will help you. When prompted in the right direction they are very helpful but without your own insight into your individual case they may find it difficult to give the appropriate advice. You should not need to employ a specialist accountant, less than an hour on the telephone over the course of 2 or 3 calls and a few evenings examining the leaflets should enlighten you to operate the system well.

In my case I the last use of my building is unsure but it was built as a house so as the building has been empty for in excess of 10 years it will all be zero rated conversion under VAT rules. Contractors are charging us 5% and we are operating the self build scheme which will enable us to claim the 5% back at the end of the job along with the 17.5% spent on materials. Then approved alterations have been zero rated for VAT purposes.

There are three categories of vat rating on buildings, 17.5% standard, and 5% reduced and zero rated. You need to look at the overall vat position with buildings not just specifically with regard to listed buildings as because a building is listed it does not exclude it from any of the other appropriate schemes which are probably more beneficial.

Zero rating is obtained for building work to a listed building classed as alteration requiring listed building consent (but not repairs), changes to multiple dwelling buildings, construction of new houses and residential buildings being redeveloped/converted which have been empty for 10 years.

If a building has been empty for three years minimum and you can prove that with confirmation from the local authority all the work can be rated at 5%. You will need to issue a certificate as per section 18.1 vat notice 708 to each of the contractors you use to obtain this lower rating. This lower rating also applies to commercial and agricultural conversions to residential. If you intend to buy a commercial building for residential use you should ensure the vendor zero rates the sale as you will not be able to claim VAT back later charged on the purchase price.

When a building has been empty for 10 years, again with supporting evidence from the local authority you may have the work zero rated.

Should you have a building with more than one dwelling inside the following rules may apply. If you take down the dividing walls between dwellings and change the number of dwellings and their footprints you could be eligible for zero rating some or all of the work. Notice 708 section 7.3.1 should help prompt you ask the questions you need.

If you choose to employ a main contractor he should adjust the vat rate he charges according to the scheme you are using. You will need to supply him with the correct documents and if necessary answer any question in writing to clarify the situation as he will need written evidence to support his actions. Any sub contractors will charge the main contractor vat at the standard rate; this will not affect the rate the main contractor charges you. Any independent contractors working for you directly and not through the main contractor must apply the same vat rate as the main contractor once you have issued them with the supporting evidence.

If you decide to operate the self build scheme under the ten year ruling and act as main contractor yourself you can operate as follows. Any contractors working for you should rate the vat at 5% conversion rate and any alterations to a listed building requiring listed building consent at 0%. You must keep all your vat receipts for materials. Do check section 13 in notice 708 carefully to establish what materials and appliances you can claim back the VAT on. Upon completion you must claim the vat back but within ninety days. Ensure the 5% rate is charged, otherwise when you submit your claim it will be rejected until you go back to the contractors involved and get them to charge you the correct rate and refund you 12.5%.

Whatever you do decide to do telephone the HMRC helpline on 0845 010 9000. You need to confirm the exact interpretation in relation your circumstances. They are very helpful do offer them as much information as you can which you think will benefit you. It does help to be primed with the outlines of any schemes you may think appropriate first to assist them point you in the right direction. They will send you out the following documents which take a bit of understanding but again if you are unclear when trying to interpret them call the advice line and discuss it with them.

Notice 708 Buildings and construction
Notice 719 VAT refunds for ‘do it yourself builders and converters’
Notice 742 Land and property

If you hire a contractor with his equipment this is reclaimable but separate invoices for tool and plant hire are fully standard rated for vat. If you separately hire scaffolding this would be standard rated although if the labour and hire are separated the labour would be reduced rated. All professional fees are standard rated.

If you want to move into your self build scheme, you can the day after the work starts with no adverse effects on your claim. It seems if you have a contractor doing the work if you start using it as a dwelling he has to start charging vat from the point you move in.

You should not need to employ a specialist accountant less than an hour on the telephone and a few evenings examining the leaflets should enlighten you to operate the system well.

 

[biffvernon]

LEGAL - Avoiding VAT pitfalls

The link above is to an article from qsweek.com that anyone considering dealing with VAT on old buildings or HMRC in general may find well worth reading.

 

[worms]

David, you say that you got an unequivocal no from HMRC on the question of claiming VAT back on materials for DIY work. Would this be any different if you set up a limited company, registered for VAT and carried out the work on contract to yourself - or if need be on contract to the Memsahib? While this may seem a bit if a hassle, on a large property it could be worth it. I wouldn't of course ever suggest that you provide a similar service to other PPUK folks who happen to do most of the work between your delivery of the materials and your arrival to do the work for them!

 

[Moo]

Evelyn has put this very useful link on the old site.


http://www.qsweek.com/nav?page=qsweek.contentspage&fixture_page=4822151&resource=4822151&view_resource=4822151

 

[Moo]

Evelyn has put this very useful link on the old site :
http://www.qsweek.com/nav?page=qswe...822151&resource=4822151&view_resource=4822151

However, it can be problematical to open, so I've copied the text for instant reference

LEGAL - Avoiding VAT pitfalls

The case of Dr Robert Nicholson, heard at a tribunal in March, has wide implications for quantity surveyors and illustrates the importance of standing up to HM Revenue and Customs (HMRC) if one believes a wrong decision has been made.

The case concerned a listed barn and outbuildings which had been converted into a house and annexe. Although the works to the listed barn qualified for zero-rating, VAT was paid as advised by HMRC. In most cases the DIY scheme allows private individuals to claim back the VAT on most of the materials purchased for building a house or converting a non residential property into a house.

Dr Nicholson was advised by HMRC to wait until the conversion work was finished and then reclaim the VAT paid on materials. However, when he sent in the claim, he was told that the work should have been zero-rated in the first place and that that he couldn’t now claim it back. He was also told that his claim was too late because three years had passed. This was despite the fact that it had not advised him of the three-year limit for reclamation in the first place and had not told him that the work should have been zero-rated.

In the tribunal that followed the HMRC argued that the outbuildings did not become a separate dwelling, that they could not be used independently of the main house and that because the DIY scheme only applied to single buildings, the VAT could not be reclaimed. All points were summarily dismissed by the tribunal.

One key test that the tribunal used was the mathematical ‘nonsense logic’ test, in which a basic premise is carried to its logical conclusion. If you get a nonsense result then the conclusion is that the basic premise must have been flawed in the first place. Applied to this situation, the tribunal said that if HMRC’s arguments were carried to their logical conclusion, no such conversion would ever qualify for a DIY claim, although the law clearly intends that some should. HMRC’s arguments were deemed to be fundamentally flawed.

Both parties were given 28 days to respond because HMRC Counsel claimed that it had not had sufficient instructions to be able to respond to difficult questions. When, after four weeks, HMRC had not responded, the tribunal decided in favour of the taxpayer.

HMRC is notorious for running arguments that, if taken seriously, would mean that no conversions would ever qualify for reclaim. The arguments used here were utterly ridiculous. Many taxpayers would have been intimidated by HMRC and accepted its first decision. This case proves our long-held view that the worst mistake a taxpayer can ever make is to assume that HMRC must be right and it also shows that decisions by the taxman can be battled - and won.

The case also highlights the importance of using the correct language to describe property. The use of a particular word can change the way a law is interpreted. Surveyors often discuss annexes and extensions without realising the precise definitions those words have in VAT language. Although it may make no difference from a commercial point of view, for VAT purposes, the distinction can be crucial.

If inappropriate or loose wording is used, this can muddy the waters and make it easier for HMRC to put its arguments forward. Town planners are equally in the frame here. The language used is vital, particularly on the architects’ drawings, in planning applications, contracts with builders and surveyors valuations. The way in which words such as renovation, refurbishment, reconstruction, dwelling, annexe, extension and building are used, to name but a few, should be considered very carefully. Getting the description framed in the most appropriate VAT jargon could save hefty VAT bills.

 

[middi]

MOO.

TELL Evelyn to get off her a**e and jump on this side of the fence.

 

[skier-hughes]

Moo, the problem with the link is the addition of the syntax you have added. Graham

 

[skier-hughes]

Also, having now read the item, He didn't actually win the case based on the law - as such - but due to default on HMRC's inability to respond within the time period.

Now, whether they didn't do this because they new they couldn't win, or were simply are inept.... this will still need to go thorugh a proper court case to get a formal legal ruling.

This just adds the confusion :roll:

Graham

 

[Moo]

Graham - which bit of the link is the syntax?

 

[skier-hughes]

Evelyn has put this very useful link on the old site.


http://www.qsweek.com/nav?page=qsweek.contentspage&fixture_page=4822151&resource=4822151&view_resource=4822151

Above, you can see the http.......
but at the end of the we address you have the URL syntax

So when you click on the address it thinks the url bits are part of it and can't find the address.

If posting a straight web address there is no need to use the URL buttons, but if you do, you need to highlight the words that you wish to be either side of the www.webaddress[/ URL] and then clic...sense to me..... Hope it does to you. Graham

 

[biffvernon]

Or you could have just clicked on the link that I posted in my message before Moo's

 

[Moo]

Sorry, Biff!

 

[biffvernon]