10 VAT tips for new developers

16 August 2016

We’ve compiled a number of VAT tips for new developers below. The list is not exhaustive and as always you should seek professional advice specific to your circumstances.

  1.  A builder involved in constructing new dwellings from scratch in most cases should charge the zero-rate of VAT on their services. Even if they are VAT registered the bill for their services should show VAT at 0%!
  2. If the same builder also buys the building materials that they install, then the onward charge to the developer for those materials will also be subject to VAT at the zero-rate.
  3.  Architect and surveyor fees are usually charged with VAT at 20%, but using a ‘design and build’ company to provide these services allows them to be subject to the same VAT rate as the building works, potentially reducing the VAT on these services down to zero.
  4. When renovating an old residential building, it’s good to know that if it’s been empty for 2 years or more, the works should qualify for VAT at the reduced rate of 5%. Sometimes it’s worth postponing the works for this very reason. The builder will not necessarily know this and may need you to guide them.
  5. Similarly, the works involved in converting an old pub, barn or other commercial property into residential units will be subject to VAT at 5%.
  6. It’s possible to ‘dis-apply’ the VAT on a commercial property purchase if you intend to convert it to residential units. This is done by submitting form VAT1614D to the vendor prior to agreeing the price.
  7. If the vendor is strongly opposed to the disapplication, keep in mind that you may be able to recover the VAT charged on the purchase if you plan on selling the new residential units, or granting long leases in them.
  8. It’s not usually possible to recover the VAT on a conversion or renovation, if both before and after the works; the building was residential in nature. However, if an old residential property has not been lived in for 10 years or more, the VAT on works is recoverable if the plan is to sell the new units or grant long leases in them.
  9. If you are not developing new property in the course of business and want to construct or convert something for your own personal use, there is a DIY refund scheme that endeavours to put self-builders on an equal footing to commercial developers.
  10. As always, there are conditions and exceptions associated with the tips above, so it’s always good advice to seek advice.

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