Reclaiming Vat on refurbished property

Hi Helena

I’m not a qualified tax adviser but one question immediately springs to mind. Do you sell the properties after you have refurbished them or do you retain them as investments and then rent them out?

My understanding is that if you sell them you should be able to reclaim the VAT. You would need to get specialist advice on this as the tax treatment is completely different. For example, your profits would be taxed as income or corporation tax if your business is incorporated whereas if you let the properties you will pay CGT on any gains you make when you eventually sell up. So far as I know, you can’t reclaim VAT on a residential property which you are refurbishing or developing for residential letting purposes. You can on a commercial property though, for example a hotel or a guest house, so I suspect that’s what your accountant was eluding to when he mentioned services. I’m not sure where serviced holiday lets falls into this so again I would suggest you take advice if that’s the market you are operating in.

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Hi Helana,

Mark is correct. In most circumstances businesses are unable to claim back VAT incurred in respect of residential property. However, if a single building is converted into multiple flats (or a commercial property converted to residential) then you should be charged the lower VAT rate of 5% by the businesses doing the work.

Hi Helena

Following on from Mark and Neil’s comments, it can also be possible for VAT to only be charged at 5% if the property has been empty for the past two years. You would need to take advice on this though. Good luck.

Reply to the comment left by “Debbie Howard” at “19/08/2013 – 16:26”:
Can we claim vat on the materials only as we may do the work ourselves?

thanks!

Reply to the comment left by “Helena ” at “20/08/2013 – 21:39”:

Hi Helena

I believe it would work in that businesses doing the work would be able to charge you 5% rather than 20%. You would need to get independent advice if you are planning on doing the work yourselves.