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VAT 2 year empty reduced rating

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We are extending and renovating a property that has been empty for over 2 years. It meets the conditions in section 8 of VAT notice 708 for “reduced rating the renovation or alteration of empty residential premises” at a VAT rate of 5%. We also have a letter from an Empty Property Officer at the council certifying that the property has not been lived in for over 2 years.


We have a VAT registered principal contractor but neither he nor his accountant are familiar with the rules around this. Has anyone made use of this reduced rating who can provide some insights?


Reading through other posts I see that it is for labour and supply & fit arrangements only. In our scenario, where our principal contractor is purchasing building materials and installing them, can he therefore invoice me at the reduced 5% VAT rate for both labour and materials? Does he then claim the 20% on materials back from HMRC and pay them the 5% which I pay on both the labour and materials via his quarterly VAT returns?


If there are any VAT registered subcontractors who bill my principal contractor with 20% VAT added, can he also claim that back in full and invoice me for the subcontractor at 5% VAT?


Thanks in advance.

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I expect so - you'll find similar discussions here re zero VAT & self builds. The summary seems to be: yes that's right, but it's not always easy to convince the contractor (and they have to finance the VAT part). You can claim back at the end of your project though - in which case you have to finance it.


Some on here say that the right VAT specialist can save as much as they bill you. As you can imagine, yours is not a common situation, so you might need to consult a specialist to get a (somewhat) conclusive answer.


There's also an HMRC forum where you can ask questions and get slow replies - phrase as a real life actual situation, rather that a hypothetical - otherwise they won't answer it.


See here: https://community.hmrc.gov.uk/customerforums/vat



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@Alan Ambrose, thanks for your response. I'll take some time to look through the HMRC VAT forums.


You mention that I can claim back the VAT. As far as I am aware that only applies to new builds and 10 year empty renovations, but not the 2 year empty renovation reduced rate?

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>>> You can claim back at the end of your project though


The context is this - in the case of 'self-build zero rate' ... if you nevertheless get charged 20% VAT on something that's otherwise eligible  - say a bolshy but key supplier or VAT paid on an import ... then you can claim that back at the end.


I imagine this also applies to your case, but it's specialised enough that you would need to ask/confirm with HMRC.

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Posted (edited)

my builder checked with HMRC  as it was refurbisment of a derelict building -- for over 10 years,60 actually -- he came  back with chaging 5% vat on all his work and i will claim rest back at the end along with all the other bits i have bought at 20% from other suppliers

Edited by scottishjohn
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VAT 708 has akl the details but it's quite a messy guide that tries to cover all the schemes. 


Best find the relevant section and refer your tradesmen and builders to that.


I assume you haven't moved into the property as I believe that restarts the 2 year clock.

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