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Reduced VAT rating on residential property.

T.C.T.C. Experienced MentorRegistered, Tutor Posts: 1,448
If a property has been empty for more than 2 years and is being renovated, then a 5% VAT is used. Now is this the amount of VAT the owner can reclaim or the amount of VAT that the contractor should charge the owner? What clarification should the contractor get for this?
If the owner is buying materials at 17.5%, what can he reclaim - 5% or 12.5%?

A bit confusing this one - help appreciated.


  • JanJan Experienced Mentor Registered Posts: 654
    Haven't had to do this for a while, but if my memory serves me right - the contractor should charge 5% VAT. I have some notes from a course I attended, may be out of date, but could give you a better idea of what is required.

    pm your fax no and I'll fax to you

    If the owner is buying materials, is he self building?? Can claim back via self build rules, but I think they have just changed, so can't help there.

  • SarahSSarahS Feels At Home Registered Posts: 60
    VAT Notice 708

    The Contractor should charge the reduced rate. VAT Notice 708 may help as it is a complex area and will depend on individual circumstances as there are detailed conditions.

    Although many items can be reduced-rated (works of repair, maintenance, improvement i.e the construction of an extension or the installation of double glazing) some supplies must be standard rated (the installation of goods that are not building materials, such as carpets or fitted bedroom furniture, erection and dismantling of scaffolding, hire of goods etc).

  • JanJan Experienced Mentor Registered Posts: 654
    TC - I've found a manual on HMRC web site!!

    Go HMRC Home > VAT > VAT manuals > Application of VAT to particular sector > Contruction.

    Should tell you everything you ned to know and up to date.
  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Thanks for all that. However, if you are the contractor and the owner of the building, so you are buying at 17.5% all the materials, what then? Thanks again.
  • JanJan Experienced Mentor Registered Posts: 654
    If contractor VAT registered then will reclaim VAT charged by supplier surely, or am I missing something?

    PS I do remember this was covered in my course notes - I'll have a look when I am at home.
  • mc25mc25 Well-Known Registered Posts: 232
    you will have to reclaim the VAT on all purchases you have made @17.5% but obviously charge the client 5%, so let say this is the only work carried out by this contractor during the vat quarter you will end up having a VAT repayment rather than paying any VAT i hope this makes sense.
  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Not quite the point! If there is no client, the work is being done by a contractor who has bought the property, ie a property developer, how much VAT can he reclaim on the refurbishment - 12.5% or 5%. A normal residential refurbishment who mean that the developer would reclaim no VAT, but the rules on a property that has been empty say that he can claim VAT at 5% - so which way round. Any expert advice welcome...if not I will have to delve into the matter further with HMCS. Thanks.
  • JanJan Experienced Mentor Registered Posts: 654
    Sorry your op didn't make clear contractor and owner were one and the same.

    Looks likes its one for HMRC - let us know how you get on. I deal with Estate owners who develop their own derelict property, so this could be useful to know.

    Only thing similar I have come across in the past was when owner built new houses, bought materials via his Ltd company, reclaimed VAT at 17.5% and charged himself at 0%. Not quite what you are wanting I'm afraid.
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