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VAT reclaim - new build or conversion


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Hi All,

 

We're about to start the building work on my self-build and am trying to get to the bottom of whether it will be classes new-build or conversion (so I know what VAT rate to ask my builders to charge me & hence ensure my eventual claim for all the VAT, including materials, is valid).

 

My main puzzle is that the planning permission explicitly says "this is a new build", but I will be retaining some derelict walls on the site, which the HMRC guidance suggests means "conversion". In my first conversation with HMRC they said "new build". In the second they said "can't tell you until you submit you claim". The trouble is by the time I submit the claim I can't retrospectively ask all the contractors to change their billing if I've got the classification wrong.

 

The building will be something like this (though currently planned to have some kind of flashing taking water to the outside of the stone walls).

 

 

image.png.d221fa2bdaab1ad75b7c0372a78ceb60.png

 

The second potential conundrum is that my planning permission includes a separate structure (a conversion) on the same site which will eventually be a holiday let. Clearly that won't quality for the VAT reclaim & we won't start it until the main house is complete, but does it affect the validity of my claim for the main house?

 

Thanks a lot,

Adam

 

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Someone may correct me if I am wrong but I believe you can only make one claim for the whole project covered by the planning permission. Not sure then if you can apply different rates to parts of the project. Normally VAT reclaim is quite straightforward but in this case I agree with @joe90, it is worth engaging a specialist

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Seek advice from the contact @joe90 gave. Possibly the VAT help line as well.

 

To qualify as a new build you are only allowed to retain some walls, typically the front wall.

 

Important to get it right because if you pay 5% VAT to a builder in error thinking it's a conversion you can't claim it back from HMRC.

 

See VAT 708 para 3.2 and 3.2.2

 

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Thanks all. I have talked to Andrew but after I sent through the details he's not replying any more - making me think it must be a tricky case :/ . I've phoned HMRC (which I assume is what you mean by VAT helpline, Temp), a couple of times but they are refusing to tell me whether they will consider it a new build or conversion :( .

 

Adam

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18 minutes ago, adamr7747 said:

It's been a couple of weeks :(

Ah, you only posted the question 20 hours ago, didn’t realise you  had asked him previously 🤷‍♂️

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Trawling through the tinternet I found this from “build it” about a similar question from someone but had remodelling on their planning application, might be usefull ? (Or contact the VAT person at build it 

 

I am trying to determine whether our project will be eligible for VAT refund as a ‘new build’.

Our planning if is for remodelling of an old bungalow, however when we build almost everything aside from one wall will be knocked flat and rebuilt – due to cracked walls and dodgy foundations.

A developer friend advised that due to only one wall being retained and used in the new construction it will constitute a new build and be eligible for the VAT refund.

Do you know if this is the case?

 

To answer your question, it would be useful to have more information. It would be beneficial to know if you have just purchased the property, if so, has it been empty for any length of time or whether you had been living in the bungalow. It is unclear as to whether you have started the works.

The problem is that your planning consent states remodelling of an old bungalow and therefore you do not meet the legal side of the HMRC DIY VAT Homebuilders Scheme as your planning is not for a new build. HMRC state that a new build can be built on the slab and therefore the footprint of a pre-existing building, can have one notable wall or if on a corner plot then two adjoining walls usually stipulated by the planning department as they consider the property’s facade worthy of being preserved. 

HMRC state that they look at each claim on an individual basis, so if you have already started or have completed the works, I would submit a claim and back it up with further evidence. You could also approach the local planning department/building control and ask very very nicely if they can issue you with a letter that you can use as evidence, stating that, due to the dilapidated state of the property, the works carried out constitute to it being a new build. 

If the planning office do not supply you with any information in your favour, you could submit your claim with photographic evidence showing the site during the works, especially the one wall standing,
If you have not yet started on the works, I would suggest you go back to planning and resubmit a planning application for a new build. You may need a report from a structural engineer stating that the current building is not fit for purpose in support of your planning application.

Best of luck with your project,

Kathy Tisdale (Build It’s VAT reclaims expert)

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To round this off - Andrew called me back today to talk about this :) . It seems there's no clear answer as it'll be down to the HMRC interpretation (but he suggested a practical way forward to manage the risk).

 

Adam

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57 minutes ago, adamr7747 said:

To round this off - Andrew called me back today to talk about this :) . It seems there's no clear answer as it'll be down to the HMRC interpretation (but he suggested a practical way forward to manage the risk).

 

Adam

Gosh that’s not good enough…how is anyone supposed to “guess” what HMRC want 🤷‍♂️.. what was his practical way forward?

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Yes, it's very annoying. Andrew suggested just assuming it's 0 rated & getting contractors to invoice as such. When I submit the claim we add a letter explaining the situation and ask for a grace period if HMRC decide it's actually a conversion & then go back to the contractors & ask them to re-invoice :/ & then re-submit the claim...

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47 minutes ago, adamr7747 said:

Yes, it's very annoying.

There have been other threads here about VAT claims being contested and some HMRC decisions being overthrown. I am Glad Andrew got back to you with a plan 🤞

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