Office conversion

Office conversion

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If a VAT registered, self employed client converts an outbuilding into an office for his business can he claim the VAT back on this? Also, would it be allowable for tax purposes?
Brian

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By spidersong
05th Sep 2008 11:31

VAT - Yes, Tax - Don't know
I don't deal with 'tax' so cannot advise on that, however with the VAT it should be recoverable or at least a large proportion will.

A VAT registered person is allowed to recover any VAT that they incur in the course or futherance of their VATable business supplies. Assuming your client intends to use the building wholly for his business, and that business doesn't include exempt supplies then he's entitled to recover it all.

If there's going to be any 'private' use of the building then recovery will be restricted, the client should decide on a reasonable (and justifiable to HMRC) proportion of business to private use and apportion according to that at the outset. (It's probably best to agree this with HMRC at the start if apportioning is necessary).

There's an outside chance they could apply the Lennartz mechanism, if the construction works are substantial enough that the office can be seen as essentially a new asset rather than just refurbishment of an existing building. They would recover any VAT that has a partial business application in full and then make adjustments over the course of the next 20 years for any private use. I would doubt however that the works in this case could come under this, as application of Lennartz is quite strict.

So the short answer based on the brief details available would appear to be that your client will be able to recover it.

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