General (main property discussion here) - VAT on conversions

Hi does anyone know about VAT? am converting a terraced 4 bed house into 3 seperate self contained 1 bed flats, I think i might be entitled to a vat reduction on contractor services and materials supplied by them and i think it will be reduced to 5%. Anyone got any experience of this please. Cheers Lou

The following link is to the VAT Guide on HMCR website, generally speaking standard conversions DO NOT qualify for reduction of VAT rates.

8.1.1 Introduction If you carry out work to an existing building you will normally have to charge VAT at the standard rate. You may, however, be able to charge VAT at the reduced rate of 5% if you are renovating or altering:

an eligible dwelling that has not been lived in during the 2 years immediately before your work starts (although there is an exception explained at sub-paragraph 8.3.4); or premises intended for use solely for a ‘relevant residential purpose’ – see paragraph 14.6 – that have not been lived in during the 2 years immediately before you start your work.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000513&propertyType=document#P73_5889

thanks bill for your reply. i have since spoken to a vat advisor and they said i would be entitled on the basis that i am produing new dwellings but not if i rent them or sell them.i found this slightly contadictory...why would anyone do it then!! lou

I think that the advice you have been given is wrong...we have recently undertaken similar work here in the North East and had to pay full VAT.