Many people are paying too much VAT. They don’t realise that if you convert a commercial property into a residential one, increase or decrease the number of residential units in an existing dwelling, or renovate a house that hasn’t been lived in for at least two years, you qualify for a reduced VAT rate of just 5% on all the costs involved, says Tax Tips & Advice.
So if, for example, you paid standard VAT of 17.5% of £7,000 on materials, you can reclaim £5,000. Unless you operate as a property developer, you will be charged the standard 17.5% VAT rate on building materials if you buy them directly from the suppliers. So remember to buy the materials through your builder and ask them to bill them as part of the overall job.
Builders may “get twitchy over charging just 5% VAT on conversion work, as they’ll be the one to cop it if the taxman disagrees”, so give your builder copies of chapters seven and eight of VAT Notice 708. “The taxman’s advice is clear, so it should be enough to put your builder’s mind at rest.”