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VAT
or no VAT ?
Steve
Lumby
There are
several important exceptions where a VAT-registered building contractor
or subcontractor does not have to charge VAT. Generally speaking,
building conservation work is liable to VAT at 17.5 per cent,
but a reduced rate or zero rate can be applied if certain conditions
are met.
CONVERSIONS
Certain types
of residential conversion work are eligible for the reduced rate
of VAT (five per cent), regardless of whether the building is
historic or not. These include conversions from one type of residential
use to another, such as from a house to flats and vice versa,
and conversions from non-residential use, such as from a shop
to a house.
Under certain conditions, conversion work can be eligible
for the zero rate of VAT. This can be the case where the client
is a registered social landlord or housing association, and the
conversion is from a non-residential use. Zero rating can also
apply to a non-residential conversion for a registered social
landlord when a residential building that has been unoccupied
for at least ten years is brought back into habitation.
Where
the building concerned is to become a communal residential building,
reduced-rating or zero-rating is conditional upon the client providing
a certificate to the contractor, proving the client will be using
the building solely as a communal residential building. (The certificates
can be found in section 18 of HMRC's Public Notice 708 - see 'Recommended
Reading', below.) Sub-contractors working to a contractor or another sub-contractor
cannot reduce-rate or zero-rate their supplies.
VACANT
RESIDENTIAL PREMISES
Under certain
conditions, renovation or alteration work carried out to a residential
building is eligible for the reduced rate (five per cent), regardless
of whether or not the building is historic. One of those conditions
is that the building must have been empty for at least three years
before the works begin.
Where the building is a communal residential
building, reduced-rating is conditional upon the client providing
a certificate to the contractor attesting that the
building will be used as a communal residential building. Sub-contractors,
working to a contractor or another sub-contractor, cannot reduce-rate
their supplies.
ALTERATION
OF LISTED BUILDINGS
Alteration
works carried out to historic buildings can also be eligible for
the zero rate if all the following conditions are met:
- The building must be listed (that is to say, included in
a statutory list of buildings of special architectural or
historic interest: unlisted buildings in conservation areas
or buildings included in a local authority's non-statutory
list of buildings of local interest are not listed buildings)
- The building must be a residential building or a 'charitable'
building, for instance used by a charity solely for non-business
purposes and/or as a village hall
- The building must be altered by the works and a meaningful
change has been made to the fabric of the building
- The works must not be for repair or maintenance purposes
- Listed building consent must have been both required and
granted for the works.
On the final
point, it should be noted that many listed places of worship are
not subject to the usual controls over listed buildings. These
exceptions are subject instead to controls administered by their
respective churches under 'ecclesiastical exemptions'.
Where the
building concerned is a communal residential or 'charitable' building,
zero-rating is conditional upon the client providing a certificate
to the contractor attesting that the client will be using the
building solely as a communal residential or 'charitable' building.
Sub-contractors, working to a contractor or another sub-contractor
cannot zero-rate their supplies.
EXAMPLES
OF ALTERATIONS AND REPAIR/MAINTENANCE
Repair or
maintenance works are liable to VAT at the standard rate but if
they form part of a conversion or renovation as described below,
they can be reduced- or zero-rated accordingly.
| ALTERATION |
REPAIR/MAINTENANCE |
Extensions
Opening/closing doorways or window apertures
Replacement of a flat roof with a pitched roof
Damp proofing
Extending wiring and plumbing systems
Floodlighting (when installed on a building)
Replacement of uPVC windows with wooden windows for aesthetic reasons |
Replacement of rotten windows with uPVC double glazing
Re-felt and batten roof
Replacement of a straw thatch with reeds and changes to ridge detail
Redecorating
Repointing
Rewiring |
LISTED
PLACES OF WORSHIP GRANT SCHEME
VAT incurred
on works of repair or maintenance by congregations or other parties
responsible for the upkeep of listed places of worship can reclaim
that VAT through a grant refund scheme operated by the Department
of Culture, Media and Sport.
GENERAL
REQUIREMENTS
If the works
fall into more than one category and more than one rate of VAT
applies to different aspects of the job, the lowest rate takes
precedent. For example, if alterations are being made to a listed
residential building as part of the conversion into another type
of residential building, VAT will be applied at zero per cent
rather than at five per cent.
FURTHER
INFORMATION
A further
useful resource outlining how VAT applies to building conservation
work is HMRC's Public Notice 708: VAT - Buildings and construction. Copies can be accessed by calling 0845 010 9000 or visiting www.hmrc.gov.uk.
The helpline can also provide further advice if necessary.
Information
on the Listed Places of Worship Grant Scheme can be obtained by
calling 0845 601 5945 or visiting www.lpwscheme.org.uk.
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