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I have a question regarding VAT Notice 708. First the background. I have bought a 1BR flat which has been empty for 10+ years and intend to renovate it into either 2x bedsits or a 1BR flat (same use). I am a "self-builder" who will be contracting VAT registered tradesmen to carry out most of the work and would like to take advantage of the reduced rate of 5% VAT on the building and redecoration work. I am interested to hear from others who have done this regarding the end use of the flat after the work is done. I'm having trouble interpreting whether the flat would have to have some kind of social or charitable use in order to qualify for the reduced rate.
My interpretation of VAT Notice 708 is that I should qualify for the reduced rate based on my reading of Section 8 of the notice. Since I intend the flat to be used for "a single household dwelling" or "a multiple occupancy dwelling, such as bedsits", then it is not necessary for me to issue a certificate as it appears the certificate is only needed if the property was to be used for a "relevant residential purpose" such as a social, educational or charitable purpose. Am I interpreting this correctly?
Also, what's the best way to describe this to contractors? The companies that I have approached thus far and told that I qualify for a reduced rate have had no idea what I'm talking about. It seems that issuing a certificate to them would be helpful. Should I modify the template in paragraph 18.1 to suit my situation or is this illegal since, technically, I don't need to issue a certificate?
Any advice would be greatly appreciated. Thanks in advance!
Value Added Tax (VAT) considerations for property investors
Did you know that the standard cost of 20% may be reduced if not removed altogether on your refurbishment costs?
Did you know that some commercial properties require you to pay 20% VAT on top of the property price?
It is an unknown fact for many property investors that VAT can indeed be reduced or mitigated in full.
We have written an article that talks about the basics of VAT for property investors to demonstrate if VAT needs to be charged by you or if you are able to reclaim VAT back.
We have also written an article about Houses of Multiple Occupancy (HMOs), where if you meet certain criteria you can reduce the VAT rate on elements of your refurbishment costs from 20% to 5%
You can also have a reduced rate on refurbishment costs from 20% to 5% if you buy properties that have been empty for more than two years. Not only is the house price reduced because it may be in a bad state but you will also benefit from the reduced refurbishment costs.
For many investors they are not aware that VAT needs to be paid on certain commercial properties. This can come as a shock to many as it is not always obvious. By the time you find out it is too late and you have to buy the more expensive property or lose your deposit. In this article we discuss how this element of VAT may be removed altogether:
You may be aware that new property developments are zero rated for VAT purposes. However, some property investors are not aware that the VAT on development costs can be claimed back. Be warned it can be a long administration process.
Simon Misiewicz | Business Development Manager
Telephone: 0115 939 4606
Thanks for the informative links Simon.
I'll summarise what I've done for completeness.
I had a VAT registered contractor out to remediate the damp in the property and told them that I qualified for the reduced 5% VAT rate. They asked me to provide evidence which they could present to their accountant for verification. As evidence, I quoted the relevant sections of VAT Notice 708, in this case being Section 8.1.2 and then I explained why the property met each of conditions 1-4. Additionally, I obtained a letter from my local council tax office which confirmed that the property has been empty for longer than the required 2 years. This was enough to satisfy their accountant that the property was eligible for the 5% rate.
Note that I did not have to create and present a certificate because the property is intended to have a "relevant residential purpose" as defined in Section 14.2 and explained in Section 17.1.
If anyone else is trying to understand this VAT Notice and has any questions, just get in touch.