What VAT will I be charged on residential renovations?



I recently bought a vacant house at a property auction as an investment. I intend to get it renovated to enable me to let it. When I built my own home I was not charged VAT, however the same builder is now charging me VAT on this work. Is this correct?



The construction of a new residential dwelling is zero rated and this would be why your builder did not charge VAT on your own new home. This property is not a new residential property, it will be a renovation and the length of time the property has been vacant will determine the rate of VAT to be applied to any building services.


If the house has been empty for less than two years the building work will be standard-rated; if the house has been empty for more than two years, meets the conditions for qualifying residential premises, and the services are qualifying services then the building work will be at the reduced rate of 5%. This reduced rate also applies to goods and materials normally incorporated into a building if supplied by the builder as part of his service.


Obviously as a private residential landlord you cannot reclaim any input VAT and therefore the VAT element is a cost to you. Therefore if applicable you should get proof that the property was not lived, this could be from the rates department, or the electoral roll. Alternatively the auctioneer may have evidence of this.


It is also worth remembering that the supply and installation of goods that are not building materials will be standard-rated even if the rest of the renovation qualifies for the reduced rate, and any materials that you buy without installation services will also be standard rated.
Finally any architect or surveyor fees and the hire of plant and machinery will also be standard rated.


The advice above is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.


Get in touch with Anne Rooney via email ap.rooney@pkffpm.com