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Where Taxpayers and Advisers Meet

VAT recovery on residential conversions

Joined:Tue Jul 27, 2021 4:53 pm
VAT recovery on residential conversions

Postby manu2021 » Tue Jul 27, 2021 5:17 pm

A question that has been asked by a client.
Pub company that has both Exempt (residential) and VATable supplies (10/90 brewers method) and so therefore a partial exemption (standard) calculation is required.

If the business converts it’s non-residential building into a qualifying residential building with the pub no longer in existence, the rate of VAT from the construction firm is 5%. As the intended supply is residential (ex vat) can the VAT on the construction be recovered in full? Likewise can the professional fees, such as legal, project manager and architect fees etc be; recovered at 20%, completely non-recoverable because of its intended future supply, or subject to the partial exemption calculation?

Any help would be appreciated

Joined:Wed Aug 06, 2008 3:09 pm

Re: VAT recovery on residential conversions

Postby les35 » Wed Jul 28, 2021 10:06 am

Can you recover the VAT charged at 5% on conversion from commercial to residential?
Yes. but only if you sell the resulting residential unit, which is zero-rated.

And, do check whether the conversion is entirely commercial to residential. If you include some of the existing residential space in the new residential unit, you may find that you are not eligible for the 5% rate on conversion.

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