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Hi there

We have been asked by a client who does garage conversions if they would qualify to charge 5% VAT on their works.

They complete the job from start to finish including planning and architects.

They are coming upto the VAT threshold and would like to know this before charging VAT.

HMRC guidance isn't very clear on conversions from garage to adding an extra room within the residential property.

Any help appreciated.

Conversion to what? If it's to a dwelling, then surely they'll exceed the threshold.
Are they registered for VAT already?
Does the property qualify? https://www.gov.uk/government/publications/vat-notice-708-buildings-and-construction/vat-notice-708-buildings-and-construction#reduced-rating-the-conversion-of-premises-to-a-different-residential-use
Much more info needed.

20% VAT in my opinion, without further information.

Conversion of a commercial building to residential is 5% but this is not the case here.

No reason why the income is anything other than 'taxable', either 5% or 20% VAT.

The deciding factor for conversion of a garage, is whether it was used in connection with an existing dwelling, as a place in which a car was parked. (notice 708 Para 5.3):

"However if it can be established that the garage was never used to store motor vehicles or has not been used as a garage for a considerable length of time prior to conversion, its conversion into a building designed as a dwelling can be a non-residential conversion."

In which case 5% VAT.

Hi all thanks for your replies

The company convert garages into additional rooms in a dwelling. Creating more space within an existing dwelling. Ie using the garage to create a bigger kitchen or additional bedroom.

They have asked weather they can charge 5% VAT as it is a conversion. The 708 notice doesn't give much information on garages being converted and the vat regs it says it can be 5% and also 20% so I am just trying to clear up what they should charge. The company is new so is only reaching the VAT threshold now.

From what I can gather from you replies it is only if the garage has not been used for 10 years or more that they can charge 5% VAT.

Thank you again for all help.

Hi all

Contacted HMRC today. A garage with a dwelling is classed as an annexe. It is only a garage if there is enough land to convert and sell on the conversion as a dwelling.

The rule for showing a motor vehicle has not been inside for 10 years only applies if the conversion will be sold on.

So 20% VAT is applicable to all garages being converted into additional rooms to extend the dwelling as these are what hmrx class as annexes not separate garages.

Hope this help anyone who might need it.

Thanks.