VAT on change of use from office to accomodation

[stilebuff]

Hi,

I am in discussions with a property company to take on two floors of a converted barn which are currently given over to offices. They are across the road from my restaurant and would be perfect as rooms - Ive got some rooms already which I let out as I'm in a tourist area. The property company will pay for the conversion and we will pay them back through the lease over 20 yrs. However, originally they were going to employ the builder and pay him but now they want me to employ him and they will pay us to pay him.

I know we will need to get something written up legally because there is no legal connection between the company and the builder so I'll take legal advice on that. My query is more that they claim that they can't get the VAT back if they employ the builder but I can - my business is VAT registered - but they have a decent size property portfolio and I can't believe they are not VAT registered.

My question is could they be VAT registered but not eligible for VAT exemption on this particular project for some reason??? It just seems a messy way of organising the building project and I question whether its really necessary.

[les35]

You could consider asking the builder to invoice you for the VAT amount only.
(This is common practice between landlords and tenants, etc. You are the recipient of the supply, so you are entitled to recover the VAT as input tax.