Category Archives: renovation
There are old beams throughout the properties, but all (yes, all) are boxed in. As such, we couldn’t tell what the beams look like or even the condition of them – it would not be unusual for these beams to suffer from woodworm or even worse.
So we decided to take some of the cladding off in one of the cottages. The beams aren’t particularly unusual – rough sawn on one side and curved on the other. Presumably the curved shape is the natural shape of the tree.
The beam had been coated in multiple coats of paint, probably distemper (a paint usually based on lime or chalk). Much of it was flaking and loose. A slight circular depression in the beam was a hole that had been drilled through the beam – probably 12mm across – that had been stuffed with newspaper and painted over. We pulled the newspaper out and gently attempted to unravel it. Unfortunately, it was very fragile and most of it disintegrated. However, we were lucky and we manage to salvage a very small piece with a date – 1858!
Further investigation, revealed a much larger rectangular depression similar to the round one we found above. This one was a slot that had been cut right through the beam. Both sides were stuffed with newspaper and painted over. However, in the middle of slot behind the stuffed newspaper was half a broadsheet from the Leeds Murcury – also dated 1859!
From the census records of 1851 and 1861, we know that David Hobson was living in this property with his family, so we had hazard a guess at who bought the newspaper originally.
- Given that we are converting two cottages into one, I assume that we are eligible for the reduced rate of VAT (currently 5%). Is this correct?
- We are converting the barn on the end of the property into residential use. This attracts a VAT rate of 0%. Is this correct?
- When converting the barn, it will be extended. What rate of VAT applies to this element of the build?
- The proposal is to build a triple garage with home office space above. What level of VAT will this attract?
- If different parts of the build (even if completed at the same time), attract different levels of VAT how is this handled?
- If we qualify for the reduced rate of VAT, we have to prove this to our build who will then only charge us at the reduced rate. What form of evidence will satisfy HM revenues and custom?
- Certain energy saving technology has a VAT rate of 0%. How is this handled when dealt with via the main contractor?
Update: You will find the answers here.
One thing is for sure – VAT is complicated. And VAT on building renovations is one of the more complicated topics.
Two other things we can be sure about: firstly, I am not a tax accountant so make sure you get proper advice (there are a number of specialists around who can help you with this); and secondly, trying to correct the situation after the wrong amount of VAT has been charged, seems to be very difficult. So it would be wise to get it right from the start.
The standard rate for VAT (or Value Added Tax) in the UK is 20%, so this can add a considerable amount to your renovation. So it is well worth investing some time in this subject. Not matter how boring it may seem!
There are exceptions to the standard rate where either a zero rate of VAT is due or a reduced rate (currently 5%). But this all depends on the time of renovation that you are undertaking.
You can find more information (a lot more information) on the HM Revenue & Customs site here: http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm. Once you start looking into the material you will find that the definitive source is “VAT Notice 708: Buildings and Construction”. But before you get to carried and download it, you should note that it is 120 pages long!
Fortunately, there are some more understandable, and slightly shorter, texts available. You certainly might still need to dip into the official documentation for reference, but this is not where I would start. There is a great article in this month’s (Oct 2012) “Homebuilding and Renovation” magazine. You can access a version of the text online here: http://www.homebuilding.co.uk/advice/existing-homes/renovating/vat
Zero rated VAT
Building a new house attracts 0% VAT. The VAT is paid on goods and labour as the house is built and then a SINGLE claim is submitted to the Revenue and Customs to reclaim the VAT.
Converting a non-residential building into a dwelling also attracts VAT at 0%.
Reduced rate VAT (5%)
There are a number of categories of construction/renovation that attract a reduced rate of VAT.
- Renovating or altering an empty house or flat (assuming that it has been unoccupied for ten years or more);
- Converting a house into flats;
- Converting a residential building into a different residential units – for example combining two cottages into a single house.
The method of reclaiming the VAT here seems to be different – you provide evidence to the builder that you are eligible for the reduced rate of VAT and then you get charged (for labour and goods) at this reduced rate. Thus there is no VAT to be reclaimed at the end of the project. This sounds like a better approach, however, many builders do not seem to be aware of the rules and once the VAT is paid, it is very difficult to get it back.
There are exceptions to these rules, and it is not possible to get a reduced rate of VAT on everything (for example, architects fees attract the standard rate of VAT), so it would be wise to fully understand the rules before you embark on your project.
We had some questions when we looked into the details and the questions are here.