Tricky VAT / Planning Conundrum...help!

[harry_angel]

We have one of those maddening, tightrope-like conundrums where there is no easy answer, so this thread I guess would ideally be a poll of sorts.

 

• basically we have PP to demolish 2 outbuildings and build a large home office in their place. We also have full PD rights.
• our planning strategy (over time) HAD been as follows: Home Gym > Change of Use to Granny Annexe (under PD, with Cert of Lawfulness) > Change of Use to Separate Dwelling (PP app)
• however, we are now staring down the barrel of the c. £25k VAT bill on assembling the "home office" structure, which of course could be avoided if this were constructed as a full separate dwelling from the outset

 

As I see it we have 3 options:

 

• stick to the "softly softly or lily pad" planning strategy and simply suck up the £25k VAT bill in the spirit of strengthening our planning position over time
• blow our cover with the council and steam ahead with a full "separate dwelling" app, putting all building works on hold (of course this app may be approved, rejected, approved at appeal or rejected at appeal)
• persuade our builders to post-date the invoices, start both building and the separate dwelling planning app simultaneously, and then (hopefully) the timing works out whereby we're granted approval and the structure is well on its way to being finished

 

If anybody else has other ideas for a way round this I would love to hear them. And also would love to hear which option you would take.

 

Clearly the problem here is that this isn't £5k, or even £10k....it's £25k. And also we will lose our slot with some very good builders if we delay.

[iSelfBuild]

One solution is build as a mobile home which can be 0% rated if BS3632. 

[ProDave]

  On 30/10/2020 at 08:59, iSelfBuild said:

One solution is build as a mobile home which can be 0% rated if BS3632. 

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I would be interested in the practicalities of doing that.

 

How would you do that as a self builder, self designing and building a one off build?  I suspect you can't

 

I would imagine you have to be a builder, signed up to some competent persons type body to allow you to self certify that the design meets BS3632 and claim the VAT back through your VAT registered company.

 

Is there any mechanism that would allow a self builder to DIY build one and reclaim the VAT?

[SimonD]

Obviously none of this constitutes advice, but as I have some history working in the tax practice of a large professional services firm many years ago and having sat on on a local planning committee, I'd hazard a guess you'll need to tread carefully on all counts as you're bordering on some questionable activities here, especially by asking your builders to post date invoices in order to pretend you're not building when you are. With respect to the idea of building one structure and step by step changing use, the planning committee I sat on were pretty aware of this approach and certain schemes were denied due to this approach being fairly obvious as a strategy from the outset.

 

My view is that if you want to avoid the VAT and prevent sleepless nights and potentially more, you need to get yourself a proper tax specialist to advise, maybe even a good planning consultant. I do suspect, however, that the answer may be simpler than it seems at the moment as often trying to circumvent rules and practise becomes harder and more complicated than jumping through the standard regulatory hoops in the first place.

[newhome]

For peace of mind I would stick with options 1 or 2 as they are above board. Asking for future dated invoices is asking for trouble. HMRC have been known to use Google Maps satellite and street view to catch people out (we have evidence of this in an appeal that went to the tribunal). You are also asking your builder to do something illegal. What date do you ask them to put on the invoices? It could take 2 years to get full planning, and that’s if you get it at all. 
 

Your builder (if he’s doing supply and fit or labour only) will need to zero rate his invoices which he can’t if you don’t have the correct permissions for zero rating. You can only reclaim the vat on materials and there isn’t a chance in hell that you’ll get a builders merchant or similar to future date invoices. 

[Mr Punter]

+1

Don't mess with the VAT people.

[iSelfBuild]

  On 30/10/2020 at 09:16, ProDave said:

I would be interested in the practicalities of doing that.

 

How would you do that as a self builder, self designing and building a one off build?  I suspect you can't

 

I would imagine you have to be a builder, signed up to some competent persons type body to allow you to self certify that the design meets BS3632 and claim the VAT back through your VAT registered company.

 

Is there any mechanism that would allow a self builder to DIY build one and reclaim the VAT?

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You could, I just don't think most people would know where to start and probably not worth the stress and hassle of achieving compliance - for someone in the trade with a VAT registered company it's not too hard. No there isn't a mechanism as far as I'm aware as a self-builder, they would have to be a legitimate VAT registered company.

 

The reason I suggested it is because the OP is paying for builders and not self-building so it might be a good idea for him.

[harry_angel]

Belated thanks guys. Guess I'll probably just have to suck it up!

 

 

[Temp]

Are you in a CIL area?

[harry_angel]

  On 03/11/2020 at 17:54, Temp said:

Are you in a CIL area?

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I'm not sure tbh, is there an easy way of checking?

[PeterW]

  On 10/11/2020 at 08:16, harry_angel said:

 

I'm not sure tbh, is there an easy way of checking?

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It will be on your local council website either under Planning or if you search Community Infrastructure Levy

 

 

[Jilly]

I just went into the planning office and asked (pre Covid). Look out for the possibility of them changing policy in the (near) future. 

[Dave Jones]

  On 10/11/2020 at 08:16, harry_angel said:

 

I'm not sure tbh, is there an easy way of checking?

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check your planning permission notice.

 

As for the garage, ring the VATman and ask him. If there is any even slight hesitation pull it down. Losing the VAT reclaim on  a 200k build doesn't bear thinking about!!!

[PeterW]

  On 10/11/2020 at 08:29, Dave Jones said:

 

check your planning permission notice.

 

As for the garage, ring the VATman and ask him. If there is any even slight hesitation pull it down. Losing the VAT reclaim on  a 200k build doesn't bear thinking about!!!

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That isn’t how VAT reclaims work. They will only reject the part relating to the garage if it isn’t part of the planning permission, not reject the whole claim and not allow you to correct it. 
 

  On 30/10/2020 at 08:47, harry_angel said:

Clearly the problem here is that this isn't £5k, or even £10k....it's £25k. And also we will lose our slot with some very good builders if we delay.

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What is £25k..?? The total cost of building the new building under PD when completed ..?? Not sure I’m following. 

[Dave Jones]

PeterW, have a read on the reclaim guide its not black and white at all. If the vatman considers the garage part of the demolished house (in the curtilage) then could be a problem. Not saying it will or wont even it maybe could be fixed. Just I wouldt be comfortable rolling the dice on losing some/all of £40k+ for the sake of rebuilding a garage, for a couple grand.

 

Have to be careful with PD as well, they withdraw it as a matter of routine when granting planning  where I am. So if you commence and instruct building control against a planning permission can be in a sticky wicket.

Edited November 10, 2020 by Dave Jones

[PeterW]

Hang on ... I’ve just re-read this ( @Dave Jones think you have the wrong end of this too...) and you’re saying @harry_angel you have PP to remove two outbuildings and replace with a larger outbuilding to create a home office ..?? And this is not part of a larger PP scheme for a new build..?

 

That is ancilliary to an existing dwelling so doesn’t count for any VAT reclaim - you will be paying the VAT regardless. The only way to zero rate this would be to put in full PP now for a new dwelling and then move into it - is that your plan ..??
 

Also, £125k + VAT build costs for a home office ..??! What are you building ..??! You can build a pretty good sized house for that. 

[Temp]

 

  On 10/11/2020 at 09:14, PeterW said:

That is ancilliary to an existing dwelling so doesn’t count for any VAT reclaim - you will be paying the VAT regardless. The only way to zero rate this would be to put in full PP now for a new dwelling and then move into it - is that your plan ..??

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That looks like his plan but the delay means loosing his builder so he's trying to find a way around it.

 

 

 

[Dave Jones]

sorry Peter you are quite correct, i misread the posts.

[harry_angel]

Yes after speaking to a planning officer I am going to just have to suck this cost up.

 

We had a subtext-filled conversation (of the non exciting variety) whereby to my gentle query about whether we would achieve PP for a full dwelling, she said that (as suspected) a planning app to build a new dwelling in green belt (regardless of whether a building of equal size had been granted) would be viewed in an entirely different lane to a change of use app for what is already there.

 

Or, in other words, I have to build the damn thing first in order to significantly increase my chances of getting the real goodies on the other side.

[Temp]

 

  On 10/11/2020 at 17:39, harry_angel said:

she said that (as suspected) a planning app to build a new dwelling in green belt (regardless of whether a building of equal size had been granted) would be viewed in an entirely different lane to a change of use app for what is already there.

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You already have something there..

 

  On 30/10/2020 at 08:47, harry_angel said:

basically we have PP to demolish 2 outbuildings

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I guess they are too small or too far apart or?