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Where Taxpayers and Advisers Meet

5% Vat on renovation.

jimoz
Posts:22
Joined:Fri Sep 06, 2013 5:15 pm
5% Vat on renovation.

Postby jimoz » Sun Apr 21, 2019 12:44 pm

Doing a renovation on a property which is subject to 5%VAT having been unoccupied for 2 years prior.

Where would the client stand if before works started a SEPERATE detached garage was built on the property? As I understand works (apart from small essential maintenance) cannot have been carried out to the property in the two year unoccupied period. However cannot find any guidance on detached outbuildings within this period.

Thanks in advance

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: 5% Vat on renovation.

Postby Trevor S » Sun Apr 21, 2019 11:33 pm

Not an area of VAT that I've been involved in before. But the wording of the law is a good place to start! The law for the 5% rate on renovation is at http://www.legislation.gov.uk/ukpga/1994/23/schedule/7A/part/2/chapter/7

I've only glanced through quickly, and obviously my only knowledge of the project is the details within your post. But you'll see that there are two "empty home conditions, which you only need to meet one of. If the property was unoccupied for at least two years up until the renovation, with no one occupying it between the unoccupied period and the start of the works, you probably meet condition one anyway - the garage becomes irrelevant. It would seem that you only need to consider issues such as works carried during the unoccupied period if you fail to meet condition one, and are having to rely on condition two - I.e. if there has been a period of occupation between the unoccupied period and the start of the renovation.

As I said, its not an area of VAT that I've dealt with before - but (if you haven't already), worth having a read through the law and see what you think!

jimoz
Posts:22
Joined:Fri Sep 06, 2013 5:15 pm

Re: 5% Vat on renovation.

Postby jimoz » Mon Apr 22, 2019 6:12 pm

Thanks for the reply I will have a re-read.
I hadn't realised the rule was subservient to the other rule.

The property had been vacant for 2 years before the renovations were started, however I believe the detached garage was undertaken and completed after around 23 months of un occupation. I thought it would be a simple case of garage at full rate and renovations at 5% however didn't want the fact garage was started before hand to snooker the renovation reduced rate.

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: 5% Vat on renovation.

Postby Trevor S » Mon Apr 22, 2019 10:22 pm

I suppose the "logic" is that the reduced rate is designed to make it cheaper to bring unoccupied property back into use. The extra requirements attached to the second clause (applicable only to work started after the property is reoccupied) ensure that scope of the reduced rating is limited to that intended by the policy. Without these additional requirements, future construction works totally unrelated to the original renovation might be taxed at 5% simply because the property had once been unoccupied.


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