Reduced rate of VAT on empty buildings

Here at Balance Accountants we regularly get asked questions about VAT on construction. This is probably because it is such a complicated VAT area. Last week one of our clients asked us if they were correct to charge a lower rate of VAT on the conversion of an empty property. There are a number of matters to take account of but the basic principles are as follows:

1. You can charge the reduced rate (5%) of VAT on the renovation or conversion of a residential building if, in the 2 years immediately prior to the commencement of works, the premises have not been lived in.

2. If you reduced-rate your supply then you may be required to prove that the building has not been lived in during the 2 years immediately before you start work. A letter from the local authority’s Empty Property Officer would be acceptable evidence of non occupancy.

3. Other than installing goods that are not building materials, you can reduced-rate any works of repair, maintenance or improvement carried out to the fabric of the building. You can also reduced-rate works within the immediate site of the dwelling that are in connection with the:

Means of providing water, power, heat or access.

Means of providing drainage or security, or

Provision of means of waste disposal

You can also reduced-rate the renovation or construction of a garage or conversion of a building into a garage provided that the work is carried out at the same time as the renovation or alteration of the premises concerned and the garage is intended to be occupied with the renovated or altered premises.

The above details were sufficient to answer our client’s query but there are additional details that may be relevant to individual circumstances so it always advisable to seek professional advice whenever you are unsure. The full provisions regarding the reduced rate of VAT on empty properties are set out in VAT notice 708, available at www.hmrc.gov.uk/vat/sectors/builders/construction.htm

This post was compiled by Ashley Barrowclough.

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