The mixed conversion/new build nature of the project notwithstanding; it is unclear (surprise, surprise!) whether new utilities connections should attract a zero or a reduced rating.
Buildings and construction (VAT Notice 708) (2.1) makes a clear distinction in terms of 'construction services':
Later on, at 3.3.7, matters are confused:[...]
- Conversion (other than for housing associations) of a non-residential building into a qualifying dwelling or communal residential building and conversions of residential buildings to a different residential use 5%
- First time gas and electricity connections 0%
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https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section2
So, whereas a blanket application of zero-rating to 'First time gas and electricity connections' was given at 2.1, now 'connection of utilities to an existing building' may be reduce-rated (5%) in line with what you'd expect for a vanilla barn conversion.3.3.7 Connecting utilities to existing buildings
The connection of utilities to an existing building is normally standard-rated. But in some cases, the first time connection of gas or electricity may be reduce-rated.
Reference is made at both 2.1 and 3.3.7 to Fuel and power (VAT Notice 701/19). At 2.6 it states:
This again confuses matters given that my barn and extension will amount to a 'new dwelling' and the project does not involve 'conversion of premises to a different residential use' seeing as the barn was used for agricultural purposes.2.6 Connecting dwellings and certain other buildings to mains power
With effect from 1 January 2012 the treatment of one-off charges for the first time connection to gas and electricity is as follows:
- if the supply of the connection and provision of the utility is made by the same person (or by members of the same VAT group) the connection charge will follow the treatment of the utility and be reduced rated
- if the supplies are not made by the same person or if at the time of connection, the supplier of the utility has not been determined, the connection charge will continue to be standard-rated (irrespective of who eventually provides the utility)
- the first time connection of a new dwelling or relevant residential or relevant charitable building to the gas or electricity mains supply is zero rated under Group 5 of Schedule 8 to the VAT Act 1994 if the connection is made as part of the construction of the building see Notice 708 Buildings and construction for further details
- works in connection with the means of providing fuel and power as part of the renovation or alteration of empty residential premises, or of the conversion of premises to a different residential use may be reduced , rated under Group 6 and Group 7 of Schedule 7A to the VAT Act 1994, if performed on the immediate site of the premises see Notice 708 Buildings and construction for further details
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https://www.gov.uk/guidance/vat-on-fuel-and-power-notice-70119#vat-liability-of-fuel-and-power
As for water, the HMRC internal manual 'VAT Water and Sewerage Services', at VWASS5200 states:
Again, it would appear on the face of it that, whether the construction project is a conversion or a new build (or elements of both, just like mine and many often are), provided the same water supplier lays the mains, a new water connection is zero-rated.Supplies made in connection with water and sewerage services: connection charges supplied with water
Where a customer contracts with a water supplier to provide mains water and that necessitates a first time connection to that water supply, the connection will be ancillary to the zero-rate supply of water providing the supplier of the water and connection are made by the same taxable person (or within the same VAT group) to the same customer.
However, if the customer is involved in a relevant industrial activity, the supply of the water and any connection will be standard rated.
First time connection of water pipe-work is standard rated if at the time of connection, no water supplier had been identified. The zero-rate only applies if in order to supply mains water for the first time, the supplier needs to carry out the connection (it is ancillary to the supply of water). However, where the connection is carried out for the first time without any reference to a water supplier, such work cannot be ancillary to the water supplier’s supply. In such cases, the water connection will be a separate taxable supply from the supply of water.
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https://www.gov.uk/hmrc-internal-manuals/vat-water-and-sewerage-services/vwass5200
Can anyone provide any clarification, advice or past experience on this matter, please?