zero rate question

[yebaws]

Planning to build in my grounds. New build will consist of self contained accommodation (bedroom, bathroom, kitchen, living room) for use of family and friends and attached workshop for my use. Independent access, separate water supply but plan to take electricity from existing supply (no separate meter) would either the workshop or the electricity mean that I can't zero rate for vat?

 

[recoveringbuilder]

1 hour ago, yebaws said:

Planning to build in my grounds. New build will consist of self contained accommodation (bedroom, bathroom, kitchen, living room) for use of family and friends and attached workshop for my use. Independent access, separate water supply but plan to take electricity from existing supply (no separate meter) would either the workshop or the electricity mean that I can't zero rate for vat?

 

You would only be eligible for zero rated vat if you were building a new build to live in as your main residence, I don’t think what you’re planning would qualify as that.

[yebaws]

Not sure that's the case about main residence. I could be building and selling or building holiday accommodation (as I've done in the past) and it was 0 rated. HMRC just say that it has to capable of being sold as a separate residence but just unsure about elec and workshop

Edited July 18, 2021 by yebaws

[Tom's Barn]

The best person to ask is your planning officer. They need to confirm to you that the building is exempt of VAT and issue a certificate. Any building being exempt of VAT must be classed as 'qualifying' under the rules. The best person to determine this in relation to the rules is the planning officer. At least if you have their seal of approval anyone questioning you in the future can be referred directly to them if they have an issue. 

 

 

[Roundtuit]

The workshop can always have another name for planning purposes, but electricity might be a stumbling block.  To qualify for zero rating, the dwelling has to be capable of being disposed of independently I believe.  Not sure what that means in terms of splitting titles etc, but HMRC will be the arbiter ultimately rather than planners.

[yebaws]

2 minutes ago, Roundtuit said:

The workshop can always have another name for planning purposes, but electricity might be a stumbling block.  To qualify for zero rating, the dwelling has to be capable of being disposed of independently I believe.  Not sure what that means in terms of splitting titles etc, but HMRC will be the arbiter ultimately rather than planners.

Unfortunately HMRC not replying to my queries.  Had thought that about workshop also (could be a garage). In the absence of anything from HMRC think I may just shell out for the new supply and have a "garage"

[yebaws]

13 minutes ago, Tom's Barn said:

The best person to ask is your planning officer. They need to confirm to you that the building is exempt of VAT and issue a certificate. Any building being exempt of VAT must be classed as 'qualifying' under the rules. The best person to determine this in relation to the rules is the planning officer. At least if you have their seal of approval anyone questioning you in the future can be referred directly to them if they have an issue. 

 

 

Not had that about a certificate before? Builderswill just zero rate work on new builds with no questions

[newhome]

1 hour ago, yebaws said:

Not had that about a certificate before? Builderswill just zero rate work on new builds with no questions

Yes some will but more are asking for proof of planning or a certificate these days to cover themselves. What you are building is covered here however so it’s clear that your ‘annex’ doesn’t meet the criteria for zero rating as I suspect that you cannot sell the additional building as a separate residence. You will however have to pay council tax on it if the council find out about it. 
 

https://www.gov.uk/vat-builders/new-homes

 

 

 

[Temp]

+1

 

If it can't be sold as a separate dwelling it won't qualify for zero rating by a builder

 

There was even a case where someone was granted pp for an annex but there was a condition that said it couldn't be sold seperately. Half way through construction they got the planing condition removed. HMRC said that only materials purchased after the condition was removed could be reclaimed.

 

[yebaws]

Just to be clear, it won't be an annex. Separate building, separate access  separate services. If I supply it with a new supply and meter, I can't see why it won't qualify for zero rating based on what I've read. Yes, I suppose council taxable....

[newhome]

2 hours ago, yebaws said:

Just to be clear, it won't be an annex. Separate building, separate access  separate services. If I supply it with a new supply and meter, I can't see why it won't qualify for zero rating based on what I've read. Yes, I suppose council taxable....

 

If it can't be sold separately from the main dwelling then it doesn't qualify for zero rating as per the very clear info from HMRC. You may well get away with it dependent on the builder you choose but should HMRC investigate then they will be at fault for having zero rated the work. 

 

[Dan F]

Do you have planning? Does planning refer to it as a seperate dwelling or as an extension/annexe?

[yebaws]

47 minutes ago, newhome said:

 

If it can't be sold separately from the main dwelling then it doesn't qualify for zero rating as per the very clear info from HMRC. You may well get away with it dependent on the builder you choose but should HMRC investigate then they will be at fault for having zero rated the work. 

 

Seems like I will have to persist with  HMRC to clarify, but my interpretation is that what I plan is zero rateable according to guidance and nobody would be at fault. 

 

37 minutes ago, Dan F said:

Do you have planning? Does planning refer to it as a seperate dwelling or as an extension/annexe?

No, it doesn't have planning, but that would never refer to it as an annex or extension as it won't be!

[Temp]

3 hours ago, yebaws said:

but my interpretation is that what I plan is zero rateable according to guidance and nobody would be at fault. 

 

 

3 hours ago, yebaws said:

No, it doesn't have planning, but that would never refer to it as an annex or extension as it won't be!

 

I stand by earlier opinion that it must have planning permission to be a separate dwelling to qualify for zero rating for VAT. If it doesnt get planning for that then effectively it is an out building, detached annex or granny flat, call it whatever you want but it won't be zero rated for VAT.  @newhome quoted the rules from the government website.  If you think you have seen something that states otherwise please post a link.

 

I believe your best bet is to apply for planning permission for a "New Dwelling". On the site plan I would show the separate road access and show a plot boundary (eg where you would put a fence if it was going to be sold off seperately). You would not actually have to sell it off or even errect a fence. That merely establishes the site boundary for planning purposes. 

 

I would not show a "workshop" on the plans either, call it a double garage or games room or something else that new dwellings normally have. You can decide to use the double garage/games room as a workshop later without needing new planning permission (unless its for business use).

 

It's irrelevant to the planners how you do the services but they will matter to Building Control later.

 

If planning is granted for the above then, because you could sell it off as a separate dwelling, it would qualify for zero rating for VAT and almost certainly add the most value. However it you would not qualify for the self builder exemption from the CIL unless your family member lives in it for three years as their primary residence. 

 

Edited July 19, 2021 by Temp

[yebaws]

Thank you Temp. Should have made it clear that it will need planning and I will apply for it. Wanted to get vat situation sorted first though. Maybe better in terms of value to put in separate elec anyway

[Dan F]

Agree with @Temp

 

It's all up on the government website if you take a look.  The definition of "designed as a dwelling" includes the requirement for planning.  See: https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section3

 

This same page also says the following, which suggests a seperate electircal supply isn't a must.

Quote

An annexe is capable of functioning independently when the activities in the annexe can be carried on without reliance on the existing building. You can ignore the existence of building services (electricity and water supplies) that are shared with the existing building.