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Vat on residential property

I am considering renovating my personal residence which is a house with a granny flat. When I bought it was registered as 2 addresses for Council tax purposes and had 2 gas, electric and water metres. I did some basic work to the house, removed 1 each of the metres and asked my local council to register the house as one property.I didn't apply for planning permission to convert back to one house though. I am looking for VAT advisor in or close to my local area to advise me if I would qualify for 5% vat on further works which I am planning.


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5% VAT should not apply on this occation

You converted two dwellings into one, which would not fall into the 5% refurbishment. This would in general apply when creating more {edited}dwellings from the one dwelling.

Look at HMRC site for notice 708 on Building & construction. (tried to insert a link, but it is not working right)

Section 7 comes to mind

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I beg to differ

A qualifying conversion is simply one where the number of residential dwellings afterwards is different from that before. This would apply to both an increase and a decrease. Whether 2 have become 1 in this case is a question of fact.

However, the OP implies that the conversion has already happened. Depending on what the "further works" are, the 5% rate may not be applicable.

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thank you for your prompt replies..i did indeed read the HMRC rules on their site and sadly was unable to reach a conclusion. I feel that the number of dwellings afterwards is the key factor, but am not sure if changing the council tax status will have made a difference. I wondered if there are practices that specialise in this area of VAT that I could hire to investigate further for me.

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Whether or not there was a single dwelling before the conversion should be a matter of fact - it shouldn't require the input of a VAT specialist. Once the facts have been established, the VAT is relatively straightforward.

The issue here is that you are considering the VAT rate applicable to "further works" - what are those further works?

And what "basic work" did you do, other than removing the meters? Usually, a 'granny flat' is considered to be part of a single dwelling - it will depend on, for instance, what access existed between the two parts of the building.

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when I bought the house it was sold as one house but it had 2 of all metres and 2 separate council tax bills. I redecorated and updated the plumbing and electrics and removed one of each of the metres. I wrote to Kensington and Chelsea council and asked it to be considered as one hsoue as we weren't renting the basement out separately as the previous owner had done. I didn't apply for planning permission to convert the original 2 flats into one. I would now like to do proper work removing the wall between the ground floor fo the "upstairs part" of the flat and opening it up to the basement. Making the 2 flats into one. But am not sure if having changed the council tax status will mean I am disualified

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was it two dwellings before

In order to comply with VAT 708 notice there would have had to be two separate dwellings to start with. Have a read of that notice especially Para 14.2.1. I would imagine it would fail as the granny flat couldn't be sold off separately. Just having two council tax bills and two meters may not satisfy HMRC.

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Has the number of dwellings changed?

The matter is certainly not easy, partly because works appear to have been carried out without Planning Permission. You should note that this is one of the conditions for using the 5% reduced rate.

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The answer is "no"

If one looks at the property now there is only one dwelling; once the renovation work has been completed there will still only be one dwelling. Accordingly, as there has been no change in the number of dwellings (and the change can be down as well as up) the reduced rate cannot apply to the further works to be carried out. The initial works MAY have qualified for the reduced rate but it is certainly not clear based on the facts set out. It is, in any event, academic as what is done is done. VAT law in this area is complex and I would always recommend that someone checks out what reliefs may be available BEFORE any works are commenced.

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Les is correct

Though for completeness, the condition applies only to statutory consent that is required. (Though it would be unusual, in the case of a genuine change in number of dwellings, for consent not to be required.)

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The poster asked for a VAT specialist

If he could advise us where he is based I am sure he can get the specialist he has requested.

I admire him for requesting this kind of help.  Too often we have posters who do not and then try to understand themselves the complexities.

I am not a VAT specialist

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Changing two dwellings into one.

I recovered Vat on a conversion of two flats into one in Chelsea last year.

Consulted only on completion, I recovered 15% of the vat  charged (20% -5%).

It was a step by step procedure done with the cooperation of the contractor. 

I specialize in recovering Vat on Property and would point out that in every instance the recovery of Vat was facilitated by having a planning consent (in many cases essential).

In this instance I would recommend that a Vat practitioner be consulted: if there is a way he should find it and make recommendations about the way forward. Most give a no-charge first consultation, usually by phone when the consultant can get answers to relevant questions.

The Public Notice 708 is a guide, but is not comprehensive.On borderline cases like this neither it nor the HMRC enquiry section would be found to be helpful.

Francis Golden

Highmead Vat Consultants 



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Internal access

Much is likely to depend on whether or not, prior to the initial works being carried out, there was any form of internal access between the two dwellings.  In my experience in the case of a granny annex there normally would be provision for internal access, whereas the references to letting out one part and to opening up some form of access imply that perhaps there was not.

The VAT relief (5%) applies where the number of 'single household dwellings' in a building is changed.  One element of the definition of that term is that there is no provision for any internal access between the dwelling and any other dwelling (see paragraph 14.4.1 of HMRC VAT Notice 708 for the full list).  

It follows that the existence of internal access (or even provision for internal access) immediately and comprehensively prevents the reduced rate from applying.  

On the other hand, if there was no such internal access or provision for access, it would seem that there would indeed be some mileage in looking more closely with a VAT specialist eye.

Neil Owen

VAT Advisory Services Ltd 

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may I thank everyone that took the time to reply, I very much appreciate so many different opinions on something that I think is extraordinarily unclear. Once I find out the answer I will post it


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Changed Number of Dwellings Conversion - Notice 708 7.3.1
Changed Number of Dwellings Conversion – the rules are explained in section 7, VAT Notice 708
7.3.1 What if I am both converting and refurbishing different parts of the building at the same time?

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