Do empty properties benefit from reduced VAT rate on building works?

Reply re VAT 5%. I used to be a VAT adviser, bit rusty but looking at Notice 708, which is guidance for the builder, it does state at 8.1.1 that to qualify for reduced VAT 5% it needs to be eligible dwelling or residential dwelling not lived for 2 years prior to work starting.
Proof of being empty can be Electoral Roll, Council Tax or Utilities. I would recommend a letter from Empty Property Officer at local council to confirm.
Builder must hold a valid certificate from customer stating intended use prior to work starting. This can downloaded from hmrc, see end of section in Notice 708.
If I was advising the builder I would tell him to obtain copy of whatever proof customer has that property has been empty for 2 years or request letter from Empty Property Officer himself and to keep all certificates/proof with his VAT records. I would also tell him only he can apply the 5% VAT, any subcontractors must still charge him 20% VAT, also to ensure he only applies the reduced rate VAT to eligible goods and services, details of which can be found in Notice 708.
It is the builder who will suffer penalties from HMRC if any discrepancies.

I thought this could apply to my situation, but sadly, I don’t think it will.

While the previous owner vacated nearly 2 years ago, I have been subject to council tax since I bought it last July, even though I haven’t moved in due to the need for extensive works. The works needed will not qualify for the 6 months stay on CT because they are considered elective, even though new electrics and plumbing were highlighted in the survey.

Reply to the comment left by Jill Church at 21/02/2024 – 11:29
Thank you Jill. On the topic of part of the work doing before the two years are up and another part of the works (and billing) being done post the 2 years I wonder if two sets of VAT rate could be applied. eg. 20% for anything before the 2 year period and 5% for works post the 2 year vacancy period. Thank you

Reply to the comment left by Bruno at 21/02/2024 – 12:16I don’t think so, Notice 708 clearly states at 8.3.1 “The 2 year rule” that you can only reduce rate the works if in the 2 years immediately before the renovation works start the qualifying premises has not been lived in.
Think HMRC would take dim view of works being split into pre and post 2 year time frame, and could deem all the work to be subject to 20% VAT.
Maybe worth checking with your own accountants/tax advisers.
Annoying as it is, I personally would wait until the 2 years are passed to be safe.

Reply to the comment left by Jill Church at 21/02/2024 – 13:13Further to my earlier comment “I would wait until the 2year s have lapsed”. On reflection and with my landlord hat on.. suffering the 20% VAT could be more beneficial. Sooner work done, sooner it’s bringing in rent. Plus building costs may increase by October, and in meantime you may be charged extortionate empty property charges by local authority until it is occupied. All depends on amounts involved.

Reply to the comment left by Jill Church at 21/02/2024 – 17:04
Thank you Jill, this sounds very sensible.

I am interested in this thread, because I am planning to refurb my mums house in November which will be 2 years since she passed away and it has been empty since. Does anyone know if the 5% Vat in this instance applies to labour costs (i.e builders) as well as materials, and does it help if you are already Vat registered (I am from my previous career). Thank you in advance.

Here the HMRC guidelines.
https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section8
It’s reasonably clear once you read through this.
The reduced rates applies to materials and labour with some exceptions.
Your builder would need to charge you at 5% rather than 20%. I am not sure it’ll be possible to claim the VAT on materials if you buy them yourself.

What isn’t defined is the ‘2 years’ qualification, which is critical.

If you buy a property which has been unoccupied by the previous owner for 18 months, and building work doesn’t start for 12 months, during which time you haven’t lived there due to various structural issues, that should mean you qualify for the 2 years rule.

However, does it also mean you must not be on the electoral role at, or paying council tax and bills for that property?

Reply to the comment left by NewYorkie at 24/06/2024 – 10:00
I have a couple of these projects and what I found is that the builder and their accountant must be comfortable with the evidence provided.
In one case I had a letter from the empty property officer of the council which is obviously ideal but not all councils have this role.
In another case I had evidence provided by the utility company showing no gas and electricity used.
I assume HMRC would look for evidence which confirmed the vacancy beyond reasonable doubt in the case of an audit.