VAT on New Sewage Treatment Plant for conversion

[TimberButcher]

I thought I understood the VAT position for conversions pretty well: 5% on labour and materials.  I managed to get the reduced rate levied on my electricity and mains water connections, but a quote for a new STP (sewage treatment plant) installation includes VAT at 20%.  This is initially for a static caravan but will eventually serve the barn that I'm converting.  Am I entitled to a reduced VAT rate or not?  I 'd very much appreciate a response from someone with a similar experience...

 

Many thanks!

[Temp]

I believe it should be reduced rated if it is clearly for the house. The fact that its initially being installed for use by the static van first might be an issue. Consider getting them to install it and connected to the house, then hook it to the van yourself. Ask them to requote at 5% VAT because its for a conversion. Quote your planning reference number and VAT Notice 708.

 

To be reduced rated the work must be "closely connected" with the construction of a new dwelling.

 

See 3.3.4 to 3.3.6 for examples ..

 

https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#para3-3-4

 

 

Edited August 22, 2020 by Temp

[nod]

4 hours ago, TimberButcher said:

I thought I understood the VAT position for conversions pretty well: 5% on labour and materials.  I managed to get the reduced rate levied on my electricity and mains water connections, but a quote for a new STP (sewage treatment plant) installation includes VAT at 20%.  This is initially for a static caravan but will eventually serve the barn that I'm converting.  Am I entitled to a reduced VAT rate or not?  I 'd very much appreciate a response from someone with a similar experience...

 

Many thanks!

It’s often difficult to get these companies to reduce or even Zero rate They  don’t always understand the vat 
 

I had trouble getting the gas Conections to zero rate They did eventually Same problem with electric Conections 

Told then Gas have They OK no problem 

As I say because the previous 50 customers have paid full 

It doesn’t mean you have to 

[PeterW]

Depends on the conversion. What are you converting ..?? 

[TimberButcher]

19 hours ago, Temp said:

I believe it should be reduced rated if it is clearly for the house. The fact that its initially being installed for use by the static van first might be an issue. Consider getting them to install it and connected to the house, then hook it to the van yourself. Ask them to requote at 5% VAT because its for a conversion. Quote your planning reference number and VAT Notice 708.

 

To be reduced rated the work must be "closely connected" with the construction of a new dwelling.

 

See 3.3.4 to 3.3.6 for examples ..

 

https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#para3-3-4

 

 

 

Superb advice, thank you!  The STP will eventually be for a barn conversion, but I haven't planned drainage for it as yet.  I'll ask for a requote stipulating that the STP is for the barn and citing the planning ref.

 

I had a real battle with Anglian Water for a reduction to 5%.  HMRC's position seemed pretty clear here (https://www.gov.uk/hmrc-internal-manuals/vat-water-and-sewerage-services/vwass5400) and here (https://www.gov.uk/hmrc-internal-manuals/vat-water-and-sewerage-services/vwass5200), but AW weren't going to budge until I cited HMRC.  I know VAT is a mess but you'd think the larger companies would be geared up for queries now, especially given the number of conversions!  UKPN, by contrast, were much easier to deal with...

[TimberButcher]

17 hours ago, nod said:

It’s often difficult to get these companies to reduce or even Zero rate They  don’t always understand the vat 
 

I had trouble getting the gas Conections to zero rate They did eventually Same problem with electric Conections 

Told then Gas have They OK no problem 

As I say because the previous 50 customers have paid full 

It doesn’t mean you have to 

 

Could it be that the big boys make your life difficult because they get hassled by HMRC to get as much VAT as possible?  I can see no other reason given that VAT does not benefit them one iota...

[TimberButcher]

16 hours ago, PeterW said:

Depends on the conversion. What are you converting ..?? 

 

It's a barn that was originally part of another property.  This is a first time connection.

[nod]

2 minutes ago, TimberButcher said:

 

Could it be that the big boys make your life difficult because they get hassled by HMRC to get as much VAT as possible?  I can see no other reason given that VAT does not benefit them one iota...

I don’t think most of the office staff dealing with invoices understand VAT 

 

I been doing the framing on a mill for the past four years 

Some of it is 5% vat some 20% 

Same site same building 

[PeterW]

Ok so was the planning for the barn obtained before or after it was separated (legally) from the other property..? 
Was it an agricultural building ..??

Is this a class Q conversion ..??

 

All this can affect the VAT position, and that can confuse some matters. The VAT 708 note is worth having to hand - just create a standard letter and use that, quote your planning and the 708 link inc the paragraphs above and it should be fine. 

 

 

[TimberButcher]

5 minutes ago, nod said:

I don’t think most of the office staff dealing with invoices understand VAT 

 

I been doing the framing on a mill for the past four years 

Some of it is 5% vat some 20% 

Same site same building 

 

How can that be?  Surely all works for a conversion are 5% rated?

 

Best of luck with your conversion!  Mill or windmill?

[TimberButcher]

2 minutes ago, PeterW said:

Ok so was the planning for the barn obtained before or after it was separated (legally) from the other property..? 
Was it an agricultural building ..??

Is this a class Q conversion ..??

 

All this can affect the VAT position, and that can confuse some matters. The VAT 708 note is worth having to hand - just create a standard letter and use that, quote your planning and the 708 link inc the paragraphs above and it should be fine. 

 

 

 

Thank you very much for your reply!  Good advice!

 

It was an agricultural building.  I obtained permitted dev. and then full planning (to include an extension) long after it was split from the 'main' property.  VAT notice 708 seems to be a pretty handy document!

[nod]

7 minutes ago, TimberButcher said:

 

How can that be?  Surely all works for a conversion are 5% rated?

 

Best of luck with your conversion!  Mill or windmill?

We thought that also 

and the HMRC confirmed it was down to end usage 

Whike some are apartments Others parts are being used as workplaces 

 

We also have this when doing student accommodation new builds some are zero Some are reduced rate 

If the University is retaining its zero 

If it’s being past onto investors It’s chargeable 

Ive no idea of this when invoicing 

So charge on all 

 

The list goes on 

[PeterW]

4 minutes ago, TimberButcher said:

Surely all works for a conversion are 5% rated?

If only it was that simple ..!! I’ve just done a conversion of an old double garage that had not been used for storing a car for over 10 years. It had contained boxes of antiques and other rubbish that was not used for the house but used for storage for an antiques business. That would meet the HMRC guidance that it would trigger a VAT exemption, which seemed to be a good start ....

 

The issue was.... HMRC wanted a signed letter from the previous owner that it had not been used as “ancillary to the dwelling house” for a period of 10 years previously, but then went on to say that if it hadn’t, and had been used for “business purposes” then they may need to apply for retrospective planning permission for change of use, which would then create further issues for the previous owners ...! HMRC also said that they only “may accept” the letter, and may request “further evidence” but didn’t list what that was ...

 

As my old accountant once said, 50 Shades of Grey isn’t a novel, it’s the HMRC VAT guidance documentation ..!!!

 

 

[TimberButcher]

8 minutes ago, nod said:

Whike some are apartments Others parts are being used as workplaces 

Ah mixed usage then I kind of understand...

 

Is the structure itself in good nick?

[TimberButcher]

9 minutes ago, PeterW said:

If only it was that simple ..!! I’ve just done a conversion of an old double garage that had not been used for storing a car for over 10 years. It had contained boxes of antiques and other rubbish that was not used for the house but used for storage for an antiques business. That would meet the HMRC guidance that it would trigger a VAT exemption, which seemed to be a good start ....

 

Well I was advised to clear out all the buildings before making my application:  the barn had not been used for more than ten years and it was a hay barn so that wasn't an issue.  The adjacent buildings were used to store building materials though, so I spent a couple of Saturdays moving everything out into other buildings not subject to development.  In the end, it was a bit of waste of time as we never had a visit from planning...

 

16 minutes ago, PeterW said:

As my old accountant once said, 50 Shades of Grey isn’t a novel, it’s the HMRC VAT guidance documentation ..!!!

 

? for such a bureaucratic org. with copious online documentation and procedures, they do seem to be deliberately vague when it comes to explaining their position to the great unwashed!

[Temp]

1 hour ago, TimberButcher said:

 

Superb advice, thank you!  The STP will eventually be for a barn conversion, but I haven't planned drainage for it as yet.  I'll ask for a requote stipulating that the STP is for the barn and citing the planning ref.

 

I had a real battle with Anglian Water for a reduction to 5%.  HMRC's position seemed pretty clear here (https://www.gov.uk/hmrc-internal-manuals/vat-water-and-sewerage-services/vwass5400) and here (https://www.gov.uk/hmrc-internal-manuals/vat-water-and-sewerage-services/vwass5200), but AW weren't going to budge until I cited HMRC.  I know VAT is a mess but you'd think the larger companies would be geared up for queries now, especially given the number of conversions!  UKPN, by contrast, were much easier to deal with...

 

I had same with AW some 13 years ago. They eventually said my water main diversion could be zero rated because my house was being connected to the diverted main. I believe thats nonsense because the diversion was necessary to allow the house to be constructed (see vat 708 3.3.4a "..allows the construction of the building to take place") so it should be zero rated even if I was digging my own bore hole.

  

[Temp]

1 hour ago, nod said:

I don’t think most of the office staff dealing with invoices understand VAT 

 

I been doing the framing on a mill for the past four years 

Some of it is 5% vat some 20% 

Same site same building 

 

That can happen if work starts before planning permission has been granted. I'm sure there are other reasons but it shouldn't normally be the case.

 

 

[Temp]

1 hour ago, TimberButcher said:

 

Thank you very much for your reply!  Good advice!

 

It was an agricultural building.  I obtained permitted dev. and then full planning (to include an extension) long after it was split from the 'main' property.  VAT notice 708 seems to be a pretty handy document!

 

Certainly is. Some sections like 3.3.4 "Work closely connected to the construction of the building" can cover quite a lot of things that aren't actually part of the building. 

 

 

[newhome]

If you really can’t get them to yield and charge 5% VAT then you could include the 20% invoice with your VAT reclaim. It should be refused by HMRC but it will give you something official from HMRC stating that 5% should have been charged allowing you to give it another go. An example of the letter HMRC sends is in this post (reason code 1). This is for a new build so you will get something slightly different for a conversion. 
 

https://forum.buildhub.org.uk/topic/6851-a-guide-to-the-vat-reclaim-process/?do=findComment&comment=115967

 

 

 

[nod]

2 hours ago, Temp said:

 

That can happen if work starts before planning permission has been granted. I'm sure there are other reasons but it shouldn't normally be the case.

 

 

No it’s all down to final use 

Absolute nightmare 

[TimberButcher]

10 hours ago, newhome said:

If you really can’t get them to yield and charge 5% VAT then you could include the 20% invoice with your VAT reclaim. It should be refused by HMRC but it will give you something official from HMRC stating that 5% should have been charged allowing you to give it another go. An example of the letter HMRC sends is in this post (reason code 1). This is for a new build so you will get something slightly different for a conversion. 
 

https://forum.buildhub.org.uk/topic/6851-a-guide-to-the-vat-reclaim-process/?do=findComment&comment=115967

 

 

That's really good advice, thank you.

 

I emailed and heard back from the company today (local and dependable - I don't know many companies that will respond on a Sunday!).  Owner says he will now honour the 5% rate.  Good news!  Thank you all for your advice!