VAT on restoration of farmhouse disused for over 20 years

by **afcplc** on Mon Sep 19, 2011 11:23 pm

Hello,

We are restoring a farm house.

It has been empty for over 30 years
We have planning to reinstate it as a single family home which happens to also cover a single unit of self catering use.
We are planning on renting it out for self catering, which as above is fine under the current planning category.

My question is -
Does this qualify as -
A/. a new build self catering with non restrictive domestic use - eg 0%
B/. a non residential conversion (empty over 10 years)- eg 0%
C/. a commercial venture with full 20%

If C/. I would need to know if I can reclaim the vat. Also, what are the longer term implications of having a property that has had very charged and reclamed on it?

Thanks.

by **les35** on Tue Sep 20, 2011 11:45 am

If I understand it right, there will be a dwelling, plus a self-catering unit to let?
It would be worth looking at the D-I-Y scheme for the dwelling works.
The problem with the self-catering unit is that if you register for VAT, to recover the input tax, you are effectively required to remain registered for VAT. The problem is that, if you were to deregister, there is a 'deemed supply' on deregistration, which would be exempt, which would mean you have to repay the input tax on that element of the refurb.
AND, the D-I-Y scheme does not work for a unit to be let, so you would have to tread very carefully.

by **towat** on Tue Sep 20, 2011 12:28 pm

What would happen if you just converted the whole property for your own residential purposes reclaiming the input VAT using the DIY building scheme,then "decided" to convert the self catering unit at a later date, surely then just the "conversion" costs would be Vateable?

by **les35** on Tue Sep 20, 2011 12:39 pm

There is no problem with using the D-I-Y scheme to convert the whole property. But the Planning Permission must be consistent. HMRC will disallow the claim if there is provision for lettings (since that is a business activity).
A later conversion for lettings would be fine, in principle. I would not rush to register for VAT, as previously indicated, unless the turnover exceeded the registration threshold (currently £73,000), which I suggest would be unlikely.

by **afcplc** on Tue Oct 11, 2011 12:11 am

Thanks everyone for replies.

Just to clarify, this is just a single property / just one unit of accommodation.

Does anyone know if the planning is in place for 'single unit of residential accommodation' it that means it's ok to have the builder charge 0% vat as the property has been empty for over 10 years and qualifies as a non residential conversion.

I guess the guts of it is, would the vat man be happy to use the planning as qualification for 0%. I guess the conflict is that the planning happens to still allow you to rent of the property for self catering.

by **towat** on Tue Oct 11, 2011 10:45 am

I would argue that just because the planning "allows" self catering use, you are not obliged to offer it and it would be harsh if you were refused a zero-rating on the grounds that you have the permission to carry on a self catering business in the future.

Would it be difficult to have the self-catering option removed then re-instated at a later date?