Conversion of garage/storage

[Jimbo69]

A friend is looking to convert a building in the grounds of his house which has been used previously as a garage/storage facility. It will be converted into a single dwelling. As far as I can see, and as long as it can be sold separately from the main house, the conversion work will qualify for reduced-rate VAT. Is this correct?

Thanks for any comments

[RMC]

Indeed, construction services carried out on the indicated conversion will qualify for the 5% reduced rate of VAT. See para 7 of VAT Notice 708: buildings and construction where you also find various applicable conditions.
Better still, if the building is sold, it will qualify for zero-rating and input VAT can be recovered, with some exceptions See para 5 ibid.
Of course planning permission is required, and try not to annoy the neighbours too much.

[davebrownvat]

I tend to disagree about the potential good news on VAT liability.

If the garage has previously been used as a garage in connection with a domestic dwelling, HMRC are likely to take the view that the garage is already a residential building. In which case, it won't be 5% VAT on the conversion, nor will it be zero rated on sale.