Renovating empty house and 5% VAT Question - how does it work for individual trades/purchases?

[LaCurandera]

Hi, 

We're renovating an empty property, and had hoped to do a large extension and big plans. With mortgage rates etc we're going to now live in the property for a period ahead of doing it later. We had planned as a 5% build under 708 - https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section8 and had builders that would operate as such

However, as we aren't now doing the big build, we are still needing to do some work to bring it up to a good living level while we wait. However, this wont be on a simpler main contractor basis but probably in bits, either DIY or individual trades. How does the 5% level work in that case, can I ask each trade to invoice at 5% and supply the proof (letter from council). For things like kitchens this was easier when invoiced via the builder, but as we'll be doing it on the cheap, how might that work on an IKEA / B&Q level - has anyone asked them? Equally, can I get a trade account anywhere with the 5% level for materials? 

Basically, on a more DIY-led project, how can I make the most of the 5% opportunity. 

Edited July 16, 2023 by LaCurandera

[nod]

If your using individual trades most won’t be vat registered So you would be better buying the materials 

[Temp]

In case others read this in the future..  It's important not to move in until you have started work on the renovation. My understanding is the moment you move in the reduced rating is lost. However you can move in after work has started. It sounds like you are OK because you've already had a builder do work before you move in.

 

52 minutes ago, LaCurandera said:

How does the 5% level work in that case, can I ask each trade to invoice at 5% and supply the proof (letter from council).

 

If they are VAT registered their labour and material should be 5% rated to you exactly as per your builder. You have to persuade them that's correct by referring them to VAT 708. In some cases giving them a homemade "certificate" may help. This is essentially a letter formally certifying that their work is on a qualifying dwelling under VAT 708.

 

If they aren't VAT registered they won't be charging you VAT whatever it actually says on their invoice. So there is no VAT to be reduced to 5%.  I don't think it matters  much who buys materials because neither you or the trade can reclaim the 20% VAT paid. I think VAT431C only covers the 10 year 0% scheme not the 2 year 5% scheme.

 

In practice both may quote you about the same so you really want VAT registered trades and get them to 5% rate it.

 

[newhome]

On 16/07/2023 at 20:15, LaCurandera said:

but as we'll be doing it on the cheap, how might that work on an IKEA / B&Q level - has anyone asked them? Equally, can I get a trade account anywhere with the 5% level for materials? 

Basically, on a more DIY-led project, how can I make the most of the 5% opportunity. 

No one can supply you materials at the 5% rate. This is for labour and supply & fit arrangements only so the only way you can benefit from the reduced VAT is to instruct a VAT registered builder unfortunately. On a ‘more DIY-led project’ you can’t benefit from the 5% rate unfortunately for work that you are doing yourself. The exception is for houses that have been empty for 10 years that are eligible for the VAT reclaim scheme. 

[LaCurandera]

Sorry for delayed response - Thank you!

[Temp]

If we can't sell it I have a flat that's been empty two years and in need of a new kitchen and redecorating.

I'll have to see which route works out cheaper  - DIY and 20% Vat or a builder and 5% Vat.