VAT refund on Semi detached property and maybe splitting the title

[chilliwilly77]

Hi

 

My partner and I found a plot we are interested in building on.

 

We think that there is room for two semi detached dwellings.

 

It is my understanding that the VAT refund applies when you are building a property for you or your family to live or holiday in. Strictly speaking this is what we intend on doing.  We intend on building a home for us to live in and a home for friends and family to use when they visit us. 

 

Essentially my question is, are there legitimate circumstances by which we could achieve a VAT refund on both properties. Things we are open to:

 

 * splitting the title and doing two refunds?

 * building a single dwelling that could later be converted into 2 semis.

 * ...

 

My partner and I are not yet married, if that has any impact?

[Temp]

Yes, the Self Build VAT reclaim scheme is only for people building a house for themselves or a relative to live in.  However if you employ a builder to do everything (eg buy materials and build the houses) then he must zero rate everything to you. So in that case there would be no VAT to reclaim as none would have been paid.

 

Many people employ a builder to construct the building to water tight stage and then they finish it off inside themselves. In that case the builder zero rates his bit to you and you reclaim the vat on the stuff you buy.  

 

38 minutes ago, chilliwilly77 said:

are there legitimate circumstances by which we could achieve a VAT refund on both properties

 

Yes if the second house is for a relative to live in.  The reclaim form notes at the back state:

 

 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/828064/VAT431NB_form_and_notes.pdf

 

Quote

16: Are you, or relatives, intending to live in the property you are claiming for? The work that you have carried out must not be in the course or furtherance of any business activity. Typically, the reason why you have constructed the building should be because you, or relatives, are intending to live in it.  If you have answered ‘No’, explain why you have carried out the work. If you are acting on behalf of a self­builder who has died we need the 'Grant of Representation' (Probate) document. This is required for VAT purposes. It proves that you have the court’s authority to deal with the deceased person’s estate.

 

 

 

 

Note its your intention at the outset that matters. If they intend living in the house but something happens to make them change their mind then they _may_ still allow the reclaim. For example if their financial or work situation changed and it was no longer possible for them to live in it. No doubt each reason will be considered on its merits. The point is you cant go telling the bank one story and HMRC another as they might check

 

You also need to be aware that the CIL exemption requires you to live in the property for three years after completion.   

 

It might be wise to split the land when its sold to you. There have been reports that it is difficult to get the land registry to split land at other times because of the law on covenants or something like that (you cannot enforce a covenant on yourself?).  Otherwise you could split the title when/if you sell the second house. If you need a loan the bank may have a view on this.

 

When you apply for planning permission it would definitely be better to get planning permission for both houses to be separately occupied dwellings. You don't want one lumbered with a condition making it a holiday home or preventing its separate occupation/sale.   

 

 

 

Edited November 8, 2020 by Temp

[newhome]

3 hours ago, Temp said:

 

Note its your intention at the outset that matters. If they intend living in the house but something happens to make them change their mind then they _may_ still allow the reclaim. For example if their financial or work situation changed and it was no longer possible for them to live in it. No doubt each reason will be considered on its merits. The point is you cant go telling the bank one story and HMRC another as they might check

I don’t think it works that way round unfortunately. HMRC have refused VAT reclaims where someone hasn’t been able to move in because their job changed and took them out of the area. I seem to recall a guy from the Hebrides getting caught out like that. If you intend to live in the house and shortly after moving in you have to move I think that’s ok in relation to intent. 
 

 

[newhome]

4 hours ago, chilliwilly77 said:

Essentially my question is, are there legitimate circumstances by which we could achieve a VAT refund on both properties. Things we are open to:

 

 * splitting the title and doing two refunds?

 * building a single dwelling that could later be converted into 2 semis.

My plot had planning permission for 2 dwellings and as soon as I put the VAT reclaim in HMRC contacted me and asked me what I intended to do about the second house. I rang them and explained that I didn’t own the other half of the plot and the house there had already been built and the title split. They were ok with that and the woman said that they asked in order to identify those who were self building as a business and not paying the appropriate tax. 

You might get away with claiming that the second property is a holiday home for relatives but that can affect the council tax position and you could be liable for CGT as it’s not your principal residence. As you are not married it might be possible for you both to claim that you are living in separate houses and that may get round the principal residence issue as you can have one each (married couples can’t).