have rules changed on zero rate vat for rebuildiing

[scottishjohn]

when i last visited this subject in early 2020 -after I bought my plot  i was told that if it had been empty for 10years --then it was a zero vate  rebuild

is this still the case

finally getting close to getting started on the project 

all we have now is some of the outer facades -

[joth]

If you demolish to ground level before rebuilding it's immediately zero rated, no minimum time requirements on how long it was unoccupied. This is also easier to document/prove and also means you can reclaim vat on materials DIY installed, whereas the reinstatement of old property is zero vat on supply+labour only. (Or at least was when I looked at it in 2019)

 

Are you doing a full demo?

[scottishjohn]

this where it gets sticky 

 al I have is the outer walls -- nothing else and some of outer walls ahve gone as well 

I

[joth]

Yeah that's not a full demo so you're clearly in the refurbishment rather than rebuild rules.

I suggest reading them in detail but my recollection is you need to gather some solid evidence of it never being occupied, you need to employ a single main contractor for supply+labour, and they need to see the site is unoccupied on the day that start work. 

 

[joth]

I'm slightly mixing up the 2 year rule for renovation vs 10 year rule for converting a non residential building into residential purpose.

https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section5 has all the details. Afaict the zero rating is not on the work itself, but on the eventual sale of the completed property. I haven't read it in detail though so hopefully someone who's been through it will be along soon to clarify

[Temp]

+1

The form..

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1110167/VAT431C-form-and-notes_22.pdf

 

Quote

11. Have you got evidence that the building has been empty for 10 years or more before works started?

 

Whats the planning status?

 

 

[Temp]

3 minutes ago, joth said:

I'm slightly mixing up the 2 year rule for renovation vs 10 year rule for converting a non residential building into residential purpose.

https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section5 has all the details. Afaict the zero rating is not on the work itself, but on the eventual sale of the completed property. I haven't read it in detail though so hopefully someone who's been through it will be along soon to clarify

 

My understanding is:

 

2 Years - Contractors should charge you 5% VAT under section 8 of VAT708. I believe that's the only provision. I don't think a self builder can reclaim the 20% VAT he pays on any materials. The 5% paid to a contractor cannot be reclaimed. 

 

10 years - VAT paid by a self builder can be reclaimed using Form431C.  I'm not 100% sure what rate contractors should charge you. I think its treated the same as a conversion of a non-residential building, in which case they should charge you 5% and that can be reclaimed. 

 

 

[Temp]

VAT708 section 5 covers the rules for zero rating the sale of a bulding, but it also has this on what evidence might be required which I expect is similar for self builders.. 

Quote

5.3.3 Proof required that the building has been empty for 10 years

You may be required to show that the building has not been lived in during the 10 years immediately before you start your work. Proof of such can be obtained from Electoral Roll and Council Tax records, utilities companies, Empty Property Officers in local authorities, or any other source that can be considered reliable.

If you hold a letter from an Empty Property Officer certifying that the property has not been lived in for 10 years, you do not need any other evidence. If an Empty Property Officer is unsure about when a property was last lived in he should write with their best estimate. We may then call for other supporting evidence.

5.3.4 Establish when a dwelling was last lived in

When considering when a dwelling was last lived in, you can ignore any:

• illegal occupation by squatters
• occupation by ‘guardians’
• use that is not residential in nature, such as storage for a business

A ‘guardian’ is a person who is installed in a property by the owner or on behalf of the owner in order to deter squatters and vandals. They may pay a low rent on terms that fall short of a formal tenancy. Alternatively, they may be paid to occupy the property.

A ‘guardian’ is to be distinguished from a caretaker or housekeeper who lives permanently in the property. Property occupied by a caretaker or housekeeper is likely to be furnished throughout.

If the dwelling has been lived in on an occasional basis (for example, because it was a second home) in the 10 years immediately before you sell or long lease the property, you cannot zero rate your supply.

 

 

[scottishjohn]

it says on the planning consent it was last occupied in 1963=so proof of being unoccupied is no problem 

 

[scottishjohn]

its where the self builder  bit comes in

I ceratinly have been doing it myself so far

0-but myage and old age problems preclude me from doing the whole job -

-what percentage must be done by slef builder to class as such .

first quote is going to be to get it water tight =except widows

,then maybe a second half to ginish it off ,with me doing bits in between 

 to be able to claim the 5% back 

Edited April 11, 2023 by scottishjohn

[Temp]

26 minutes ago, scottishjohn said:

-what percentage must be done by slef builder to class as such .

 

 

As its been empty >10 years you can do it all yourself, none of it yourself, or any combination in between.   

 

[scottishjohn]

11 minutes ago, Temp said:

 

As its been empty >10 years you can do it all yourself, none of it yourself, or any combination in between.   

 

and claim all the vat back at the end?

[scottishjohn]

I suspect i,m only going to be able to claim anything above 5% back 

[Temp]

 

8 minutes ago, scottishjohn said:

and claim all the vat back at the end?

Yes.

8 minutes ago, scottishjohn said:

I suspect i,m only going to be able to claim anything above 5% back 

 

No you should get it  ALL back as its been empty more that 10 years. 

 

https://www.no-use-empty.org.uk/advice-and-guidance/property-tax-and-vat/reduced-vat-schemes/

 

Quote

 

VAT – Conversion of non-residential properties empty for ten years or more

A developer or house owner can claim back all VAT charged on the renovation of a building that has been empty for 10 years or more, once the dwelling is sold. If the house owner retains the property for private residential use, they can make a claim for the VAT under the DIY Builders Refund Scheme available from Customs and Excise.

 

 

 

However its important to pay any trades the correct VAT rate. If they charge you too much VAT (eg 20%) you cannot reclaim that as you should not have paid it in the first place.

 

[scottishjohn]

that only seems to apply to non residential properties that are eventually used for a house  reading thec notice you attached

[Temp]

44 minutes ago, scottishjohn said:

that only seems to apply to non residential properties that are eventually used for a house  reading thec notice you attached

 

I should have quoted the next paragraph as well...

 

Quote

 

A ‘non-residential conversion’ is considered to take place when either: –

the building (or part) being converted has never been used as a dwelling or number of dwellings for a ‘relevant residential purpose’, or in the 10 years immediately before the sale or long lease the building (or part) has not been used as a dwelling or number of dwellings or for a ‘relevant residential purpose’

 

 

[newhome]

If it’s been empty for more than 10 years you can reclaim all of the VAT you pay for the actual build but not architects fees etc. 
 

For labour you should be billed @ 5% and you then reclaim the 5% at the end of the build. 
For supply and fit you should be billed @ 5% and you should reclaim the 5% at the end of the build. 
For materials you should be billed at the standard rate and you reclaim the 20% (in most cases) at the end of the build. 
 

Be careful to get the invoices billed at the correct rate as HMRC will not refund VAT that’s been overpaid. 
 

You will need to use form VAT431C for the reclaim. 
 

It doesn’t matter if you do the work yourself or someone does it all for you. What’s important is that it’s a project that you are doing for you or your family to live in. That’s pretty much the eligibility criteria that HMRC use plus other bits such as the house can’t have a business use occupation clause.