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  • Tax

    5% or 20% vat on HMO refurb?

    I have an existing HMO and I have just received planning permission to convert an existing annexe into a 7th bedroom. I am getting conflicting information from my builder, his accountant and mine as to whether it would be 5 or 20% vat added to the renovation costs. Can anyone clarify?

    Thanks

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    unless it is a complete new build it will attract 20 % VAT if you go to the HMRC VAT web site there is a very clear table which defines the VAT (input tax) position for this type of thing. If in doubt call the VAT office and they will give clear guidance. At the end of the day it is your risk despite what anyone advises! In my exprience all the professionals say when they get it wrong is SORRY if your lucky. good luck

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    Thanks Bob, yes I think I'll call the VAT office as it's quite a grey area on what I had planned!

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    Hi Olivia

    The key point for the reduced rate of 5% VAT is does the development increase or decrease the amount of dwellings?

    The additional criteria that applies is, are those dwellings self contained. That, unfortunately, is where your HMO will not qualify for 5% reduced VAT.

    HMO by nature, will not be self contained and will use communal kitchens, bathrooms and living rooms.

    It would be interesting to hear who was giving the correct advice? Builder or accountant?

    Dan

    Universal Property Services Ltd

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    Dan

    Universal Property Services Ltd


    One would hope it would be the accountant who gave the correct advice, but you never know!

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    Hi Dan, 

    this is where is gets a bit confusing as I am increasing by 1 dwelling.

    Also, although it will be part of an existing HMO its an annexe and big enough to have its own bathroom and kitchenette as well as a share of the main house

    Two accountants have given differing views so let's hope the VAT office will know themselves!


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    A HMO house is defined as a single dwelling in planning policy, albeit with multiple "households" within it. Multiple households does not equal multiple dwellings.

    Unless the new annex is completely self contained with no access between any parts / communal areas of the existing HMO, a new dwelling has not been created.

    A simple test is - could the new annex you intend to create be disposed of / sold separately of existing HMO? If it self contained, it could be sold separately, if it has any joint services or communal areas, it could not be sold separately.

    Dan

    Universal Property Services Ltd

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    Dan

    Universal Property Services Ltd