Reduced VAT rate - renovating and altering empty residential property

By Tolley
VAT_tax_img3

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Reduced VAT rate - renovating and altering empty residential property
  • What construction services are covered by the reduced rate?
  • Terminology
  • Conditions
  • Qualifying residential premises
  • Two year rule
  • What services can be supplied at the reduced VAT rate?
  • Garages
  • Building control and planning consent
  • Certificates
  • Granting a major interest in the converted property

With effect from May 2001 certain renovation and conversion work undertaken in respect of residential accommodation are now liable to VAT at the reduced rate. The reduced rate covers the following types of construction services.

Notice 708 ; VATA 1994, Sch 7A, Part II, Group 7; VCONST07000
What construction services are covered by the reduced rate?

The following construction services are included within the scope of the reduced VAT rate:

  • conversion of property to an alternative residential use - see the Reduced VAT rate - conversion of property to an alternative residential use guidance note for more information
  • renovation or alteration of an empty residential property

The business supplying the services needs to take care to ensure that they charge the lowest VAT rate applicable to the supply made. Therefore, the business should check and confirm that none of the construction services provided could be zero-rated.

Businesses also need to be mindful of the fact that it can only apply the reduced VAT rate to applicable construction services. If the work undertaken is liable to VAT at differing VAT rates (ie 0%, 5% and 20%) the business must apportion the value of the services provided and apply the appropriate VAT rate to the work performed. If the business cannot apportion the VAT between the different types of supply, all of the work undertaken will be liable to VAT at the standard rate. Please see VCONST07700 and VCONST06530.

Terminology

The terminology used in relation to land and property transactions can be confusing. The Land and property - commonly used terminology guidance note provides an explanation of the main types of property transactions that a business / adviser is likely to come across whilst advising on the VAT

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