The ground floor slab rule with concrete piles

[nicktwick]

Hello all

 

I have a 1960's riverside bungalow built on a concrete slab, raised about 4 feet above ground level by concrete piles.

 

I am looking into getting the piles surveyed, with the idea of building a new dwelling on the existing slab. This is only really an option I want to explore if the build would be VAT free. If it's not, I may as well take up the piling too and start from scratch.

 

However I'm confused as to whether it would be subject to VAT or not. The HMRC guidance suggests if you retain only the ground floor slab of a building then you can avoid the VAT. But it also goes to lengths to say you can't retain existing foundations.

 

Do the piles count as foundations from a tax viewpoint or not?

 

Grateful for any advice. Please feel free to indicate if you've had experience of anything similar. I will get pro advice before the build, but in the meantime would like to feel quite confident about this point.

[MikeSharp01]

Hi and welcome. @newhome will be along with words and Music on the VAT rules which have some corners, as you have found, with keeping any of the old dwelling. 

[newhome]

1 hour ago, nicktwick said:

However I'm confused as to whether it would be subject to VAT or not. The HMRC guidance suggests if you retain only the ground floor slab of a building then you can avoid the VAT. But it also goes to lengths to say you can't retain existing foundations.

 

Where are you seeing the guidance in respect of foundations? 

 

In the guidance notes for the reclaim (Form VAT431NB)

 

VAT431NB

 

it clearly states that you can retain the slab at ground level and it says the same in VAT Notice 708:

 

VAT Notice 708

 

A qualifying building is constructed when
it is built from scratch, and, before construction starts, any pre-existing building is demolished completely to ground level (cellars, basements and the ‘slab’ at ground level may be retained) – see also sub-paragraph 3.2.3;

 

I can't see any mention of foundations in that context anywhere? The word 'foundations' doesn't appear in the legislation either; Value Added Tax Act 1994, Schedule 8, Group 5, Note 18

 

 

[Temp]

Think the issue is the existing slab is raised 4ft above ground level.

[newhome]

4 hours ago, Temp said:

Think the issue is the existing slab is raised 4ft above ground level.

 

I did wonder about that but I can't see any reference to 'existing foundations' being excluded that the OP notes. If you retain the slab for the ground floor should it matter if it's raised about ground level? One of those ambiguous questions worth asking specific advice about I imagine. If however the PP shows demolition of house, followed by new build how would HMRC even know how 'high' the old foundations are? Would you even volunteer to them that the foundations had been retained? The ones that seem to go to tribunal seem to be those that started off as a rebuild, the walls collapsed or the foundations weren't adequate so they became a new build as a result without going back and getting the PP altered to say demolition and new build. 

 

[nicktwick]

I've gone digging again for where I saw the condition about foundations. I thought I was going mad but eventually found it...

 

From https://www.homebuilding.co.uk/demolish-and-replace/

"In order to qualify for 0% rated VAT, the entire existing building including the foundations must be replaced. So if you keep, say, the existing substructures, you won’t be able to reclaim the VAT, which adds a whopping 20% onto the construction cost."

 

I can't find it in HMRC guidance, but I did see this:

https://www.gov.uk/vat-builders/new-homes "any existing buildings on the site have been demolished completely to ground level"

 

'Ground level' suggests removing the piles. If it was 'ground floor level' I'd read it differently.

 

But "retaining the ground floor slab" is a well noted exception.

 

Essentially I'd be losing every wall of the existing building, but technically speaking not going down to ground level.

 

[newhome]

8 minutes ago, nicktwick said:

I've gone digging again for where I saw the condition about foundations. I thought I was going mad but eventually found it...

 

 

I don't think the Homebuilding site is correct as you can definitely keep the slab. Whether or not that extends to piles in your case is a bit more tricky. The only guidance I can see is here:

 

VAT information sheet 0717

 

and here:

 

HMRC internal manual

 

Your scenario fails the 'ground level' test I think but would pass if it meant 'ground floor level'. In this scenario you will be better writing to HMRC and asking the specific question (don't bother using their phone helpline as they have given out advice in the past and then stated they have no record of it when the case went to tribunal). 

 

 

[jack]

2 hours ago, newhome said:

Your scenario fails the 'ground level' test I think but would pass if it meant 'ground floor level'. 

 

You must be right, because even ground-based slabs are higher than ground level.

 

[newhome]

35 minutes ago, jack said:

 

You must be right, because even ground-based slabs are higher than ground level.

 

 

I don’t even know how HMRC could know how high foundations were or whether they were retained if the PP said demolish existing dwelling and replace with new build.