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VAT for barn convertors – Update December 2007

Category: Essential information December 8th, 2007 by mbc

I thought it was about time to review the VAT situation regarding the barn to ensure that my understanding is correct, so an overview of the current legislation follows with appropriate extracts.

My apologies if any of this reads a strangely, I wanted to keep as much of the wording from the official sources intact to avoid incorrect paraphrasing or misquoting. My focus in reading these documents has been very much on barn conversions so again my apologies if your interests lie elsewhere.

Notice 719: VAT refunds for ‘do it yourself’ builders and converters

Who can claim?
You can claim if you buy eligible goods and services that are used to convert a non-residential building into a qualifying dwelling or communal residential building.

Do I need to do the work myself?
You can claim for eligible goods you buy and give to your builder to incorporate into the building (or its site) provided that the work is done before the date of completion

Conversions of non-residential buildings
What is a ‘non-residential conversion’
A ‘non-residential conversion’ takes place when the building (or part) being converted has never been used as a dwelling – and it is converted into a building designed as a dwelling.

Examples of a ‘non-residential conversion’ include the conversion of:
…an agricultural building (such as a barn) Hooray!

Will I be charged VAT on goods?
Retailers and builder’s merchants charge VAT at the standard-rate on most items they sell.

Builders, however, charge VAT on building materials that they supply and incorporate in a building (or its site) at the same rate as for their work. So, if their work is zero-rated or reduced-rated, then so are the building materials. This does not apply to ‘non-building materials’ (the VAT on which you cannot claim), which remain standard-rated.

Take care to ensure that you are charged the correct amount of VAT, as you can only reclaim VAT that has been correctly charged.

On what goods can I claim VAT?
You cannot claim for:

  • fitted furniture, other than fitted kitchen furniture…
  • most electrical and gas appliances…
  • carpets, underlay and carpet tiles…
  • garden ornaments, sheds and greenhouses;
  • plant, tools and equipment;
  • consumables that are not actually incorporated in the building (e.g. sand paper, white spirit, etc.);
  • building land…

[Building materials are] the articles [that] are ‘incorporated’ in the building (or its site).
[There is a list of acceptable building materials in section 8.11 Examples of items ‘ordinarily’ incorporated in a building]

9.1 Will I be charged VAT on services?
For conversions, a builder can sometimes charge VAT at the reduced rate of 5% or, if you are a housing association, at the zero rate.

If…you are carrying out the conversion of a non-residential building…you can claim the VAT charged by your builder for converting the building.

Further information on the liability of builder’s services and how they tax goods is explained in Notice 708 Buildings and construction [see below]

Can I make claims as the work progresses?
No. You can only make a single claim when the construction or conversion of the building is completed.
…Claims must be made no more than three months after the construction or conversion is completed…
…a building can be regarded as still under construction up until the date when a certificate of completion is issued by the local planning authority.

Notice 708: Buildings and construction [download only]

Who should read this notice?
You may find this notice useful if you:
> are a contractor or sub-contractor;
> are a developer;
> need to issue a certificate in order to obtain zero-rated or reduced-rated building work

VAT liability – Construction services
The construction of a new building and work to an existing building is normally standard-rated. There are, however, various exceptions to this.

Other [(than the conversion for a housing association of a non-residential building into a qualifying dwelling or communal residential building)] conversions of premises to a different residential use. [i.e a barn conversion] … Rate of VAT 5%

Builders, however, charge VAT on ‘building materials’ that they supply and incorporate in a building (or its site) at the same rate as for their work.

So in summary:

  • Builders should charge a VAT rate of 5% on materials that they source and their labour costs.
  • Following completion of the building a claim may me made to HMRC for any VAT that has been paid (at either the full or reduced rate). This must be within three months of completion and is a one-off event (i.e. no second chance) so keep all those invoices.

If you enjoyed that post, then read these…

Flooring
As well as the health benefits of not using carpets in your conversion project, alternatives can also help your bank balance when incorporated into the building during its conversion.

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It’s been a while since a VAT update so I thought I’d review the current position, especially in view of the pre-Christmas credit-crunch fuelled reduction in the standard rate of…

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How much does a barn conversion cost? Part 2
Here I’ll consider architects, architectural technicians and touch on the other potentially pricey professionals such as structural engineers, that we’ll need to employ to bridge the link between the unconverted…

category: ‘Essential information

Posted in Essential information | 6 Comments » « Leave Yours
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6 Responses

  1. VAT for barn convertors | my barn conversion Says:

    […] VAT for barn convertors – Update December 2007 by mbc on December 8th, 2007 […]

  2. Emma Bayley Says:

    Hi,

    We are in the process of converting a barn on the edge of the north yorkshire moors, i looked at your site about VAT, please help me!!!

    I cant seem to get any sense out of the customs office!!

    My builder and other trades are charging me 5% which i know to be correct, when i come to make my claim, am i able to put a claim in for the 5% that i have been charged????

    Thank you in advance
    Emma

  3. mbc Says:

    Emma,

    My understanding is that the 5% VAT can be reclaimed. That is the information I’ve had from my own builder and certain national building magazines. HOWEVER, I’ve also spoken to the HMRC VAT helpline who say I cannot reclaim the 5% – I think at best a confused situation!

    In fairness to the VAT helpline, it is a general service providing advice on VAT across the board and this is obviously a specialised niche area. I intend to phone them again soon to see what answer I get this time – I suggest you do the same thing and we can compare notes. You can easily find the phone number on http://customs.hmrc.gov.uk/

  4. Fred Fennell Says:

    I am converting a lage barn, 6,500 sq ft and controlling it with an Architect.
    The company that did the ground works had no problem not charging any VAT.
    The main contractor of the mid section (up to first fix)
    also has not charged VAT
    However all the expenditure is allowable and does not include things like: proffessional fees, white goods, wardrobes etc.
    Is this unusual and do you think the VAT office will be unhappy. Cheers, Fred

  5. mbc Says:

    Fred, I think you may be storing up problems for the future – not sure on your exact circumstances, i.e. is this being done as a development or for you as a private individual?

    I’d speak to HMRC and seek advice.

  6. VAT Reclaim Spring 2013 Part 1 | My Barn Conversion Says:

    […] I’ve been here before five years ago (gulp! time flies!), but the forms have changed since then. […]

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