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• # 72408
• Wed 22 Jun 2011 09:52 AM

Hi All,

Just after a bit of advice please!  I have a client who has a business that I do the VAT returns for.

As a completely seperate entity he has recently converted an old stable next to his house (not attached - 2 meter gap) as a dwelling for a carer, preparation for when they get older as his wife is ill.
He has asked if he can reclaim the VAT on this building project.  Obviously the builder he has hired to do the physical work will invoice him at the correct VAT rate, however he has purchased materials/furnishings etc which he should be able to claim the VAT back on.

I have looked at the forms for this on HMRC and am after a little help as to which would fit his situation - conversion or new build?  They did build upon the site of the old stables (which were demolished to footings level in preparation for the build) and the planners are calling it a 'new build' but if you look at the HMRC rules it fits more into the conversions bracket...

Any advice on this and/or if there is anything I need to watch out for would be greatly appreciated as I have not done one of these before.

Many thanks in advance.

Lizzie

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• # 72410
• Wed 22 Jun 2011 09:56 AM

The most obvious point which comes to mind is this -

Is the building work in relation to his business? If not then the simple answer is no, you can only reclaim VAT as a VAT registered person on expenditure wholly connected with your business.

Unless fof course I am missing something here?

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• # 72414
• Wed 22 Jun 2011 11:13 AM

Geoff said:

“The most obvious point which comes to mind is this -

Is the building work in relation to his business? If not then the simple answer is no, you can only reclaim VAT as a VAT registered person on expenditure wholly connected with your business.

Unless fof course I am missing something here?”

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• # 72420
• Wed 22 Jun 2011 02:02 PM

Thanks for the enlightenment, we are always learning.

Having looked at this in more depth I think the answer is still no (again unless I have missed something).

The generality for the client to reclaim appears to be only on the basis of a DIY build. So it seems that the builder would be the one making any reclaim.

Having said that there also appears to be the criteria that

" You are eligible for this Scheme if you, for reasons other than business:

• have converted a previously non-residential property into a dwelling to

be used either by you or your relatives as a family home for residential

or holiday purposes".

Does provision of a builidng for use by a carer fall into the bracket of a family home?

• have converted a previously residential

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• # 72898
• Sun 10 Jul 2011 09:24 PM

I am not sure if this is a DIY builders scheme or a normal business development. First, in terms of new build vs conversion then if the original stables are demolished to ground level (or even with one remaining facade) then HMRC would usually see it as a new build. You may have issues if it is not capable of being sold separate to the existing dwelling.
As such the construction work by the builder should be zero rated and the first sale of the major interest (freehold or long lease) would also be zero rated.

You mentioned it is being done within a separate entity. Is the intention this entity will then grant a major interest to the owner (as an individual rather than a limited company?). If so, then if this separate entity is VAT regstered, then I think they should be able to recover the VAT incurred on the new build (subject to the restrictions for certain white goods etc) as it would relate to the zero rated supply to a private individual. VAT notice 708 refers.

If it is being built outside the context of a business (as a private individual) then the DIY builders refund scheme should apply as it serves to put you in the same position as if you bought a new house (zero rated as above) from a developer.

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