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Where Taxpayers and Advisers Meet

VAT on new-build with annexe

aalindo
Posts: 12
Joined: Thu Sep 08, 2011 4:47 pm

VAT on new-build with annexe

Postby aalindo » Mon Jan 16, 2012 4:18 pm

Hi all,

I have a scenario which I feel may fall into a slightly grey area within the guidance for reclaiming VAT on a new-build:

We have a house with detached annexe for my mother, all on a single title deed. The annexe was built last year (full rate of VAT was paid) as there was a condition on the planning permission that stated that the annexe was ‘ancillary to the main dwelling’.

So far so good. However, our plan was to renovate the farmhouse. After moving my mother into the annexe, we began stripping the house back for renovation and it soon became clear that a re-build would be a more sensible option! We have been granted planning permission, without any conditions other than a time-limit and style/materials.

As we plan to begin building in March, I have just downloaded the HMRC document (see link below) that contains the VAT reclaim form and guidance.

http://customs.hmrc.gov.uk/channelsPort ... e=document

I am concerned by para 13 (page 5) which talks about separate disposal/use of the building.

The declaration that needs signing says quite specifically ‘Do the terms of your Planning Permission (or similar permission) prevent the separate disposal, or separate use,
of the new building from any other pre-existing building?’. The factual answer to this question is no because there is no such term in my planning permission. However, although not specifically stated, it would seem logical that as the annexe cannot be sold separately, neither can the main house.

The problem has arisen because usually an annexe would be built after the main dwelling and not before. If we had built the house first at a zero rate, and the annexe after at the standard rate, there would be no problem. If I sign the declaration and crack-on, surely the outcome would be the same?

Any thoughts?

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: VAT on new-build with annexe

Postby section 44 » Mon Jan 16, 2012 5:40 pm

A potential additional complication to consider. Will the partial rebuild of the farm-house qualify for zero-rate treatment given that you have not (presumably) demolished that part used by your mother?

aalindo
Posts: 12
Joined: Thu Sep 08, 2011 4:47 pm

Re: VAT on new-build with annexe

Postby aalindo » Mon Jan 16, 2012 5:47 pm

On face value I believe it should qualify. The rebuild of the farmhouse will mean complete and total demolition of the building. The annexe is an entirely building approx 20m away, with its own utilities, council tax bill etc. I think your point may still be valid though, as (technically) the buildings are one and the same property as the legal titles are not split. The plot thickens!

Generix
Posts: 2532
Joined: Wed Aug 06, 2008 3:41 pm

Re: VAT on new-build with annexe

Postby Generix » Mon Jan 16, 2012 6:10 pm

Can I just make sure I understand the facts:

(1) There are 2 buildings, 1 house, 1 farmhouse - which although physically completely detached and seperate are on the same plot of land which is held on (at present) a single title deed.

(2) At some point recently, an annex was added to the house - the cost of this was +VAT.

(3) You will now demolish the farmhouse and rebuild it as a new dwelling.

(4) You want to know if the demo and rebuild of new dwelling as per (3) above can be zero-rated?

:D
Do you adore to transfer your artistic and inventive qualities to renovate a part type? Perhaps your friends who tour your sanctuary head remarks about want they could levy you to change their premises.

aalindo
Posts: 12
Joined: Thu Sep 08, 2011 4:47 pm

Re: VAT on new-build with annexe

Postby aalindo » Mon Jan 16, 2012 6:22 pm

Generix,

Mostly correct, but to clarify:

There is one plot of land, a farm.

Until last year, on this land was a single farmhouse. Last year we built a physically completely detached and separate house (classed as a family annexe by the council and under the planning condition that it always remains ancillary to the farmhouse). Full rate VAT was paid on building the annexe.

The farm (containing the farmhouse and annexe) is held on a single title deed (and needs to remain so for our tax planning purposes...another story!).

Correct, we now wish to demolish the farmhouse and rebuild it as a new dwelling and need to know if it can be zero-rated given the conditions laid out by HMRC.

Hope this helps...even I am confused now!

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: VAT on new-build with annexe

Postby section 44 » Mon Jan 16, 2012 7:03 pm

we now wish to demolish the farmhouse and rebuild it as a new dwelling
A new dwelling, as a opposed to an extension (albeit physically detached) of the annexe?

aalindo
Posts: 12
Joined: Thu Sep 08, 2011 4:47 pm

Re: VAT on new-build with annexe

Postby aalindo » Mon Jan 16, 2012 7:20 pm

Section 44,

Planning was initially granted for a renovation, but as i said, after stripping it back, a rebuild was the only way forward. A replacement dwelling I suppose you could call it, but as the building will be constructed on the site of a pre-existing building and will not incorporate any part of the former building above ground level it should satisfy the 'new-build' requirement.

aalindo
Posts: 12
Joined: Thu Sep 08, 2011 4:47 pm

Re: VAT on new-build with annexe

Postby aalindo » Sat Jan 21, 2012 5:58 pm

Any further thoughts anyone?

saharwood
Posts: 81
Joined: Wed Aug 11, 2010 12:58 pm

Re: VAT on new-build with annexe

Postby saharwood » Tue Jan 24, 2012 3:11 pm

a thought:

Is the same contractor involved? i.e. is it feasible works have been ongoing as opposed to more than one supply taking place. There's a case on this which I can't remember.

although intent and planning has changed in the course, the works are arguably for the construction of two new resi dwellings (I don't see why the single sale condition nature would impact on this circumstance ~ subject to the first criteria being fulfilled).


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