Reclaiming VAT on barn renovations

Reclaiming VAT on barn renovations

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My clients, a farming partnership are already VAT registered.

They are now converting barns for both holiday lettings and also letting out for the storage of caravans etc.  I believe that both of these activities will be standard rated supplies.

Is the fact that future taxable supplies will be made from these buildings sufficient as a basis for the reclaiming of input tax on the conversions/renovations?

I have been concerned that an option to tax may have been required, but now think I may be confusing myself!

Many thanks for your valued assistance

Replies (16)

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By The VAT Doctor
14th Feb 2013 12:46

Taxable supplies = recovery

Hi there

You are correct that holiday lettings and storage of caravans are taxable supplies. There have been some recent changes on storage, meaning VAT is usually charged.  One obvious exception is the rental of a whole barn for storage, which is still exempt, with an option to tax needed to recover the VAT unless deminimis thresholds apply.

Essentially, provided there is a taxable supply that is compulsory, VAT can be claimed on related costs.

Just on the conversion costs for holiday lettings, the 5% rate may apply if the barn will still be a dwelling for VAT purposes.  Just a cashflow saving though as VAT is recoverable anyway.

Hope this helps.

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Replying to Glennzy:
Quack
By Constantly Confused
14th Feb 2013 14:47

Question

The VAT Doctor wrote:

One obvious exception is the rental of a whole barn for storage, which is still exempt, with an option to tax needed to recover the VAT unless deminimis thresholds apply.

Could you elaborate on that please, as my understanding of the new rules was that the rental of an area to be used by the customer for storage was SR, regardless of whether you partition the building or let them have the whole lot.  Unless you are suggesting that the customer will then rent the space to its own customers rather than using it for storage?

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Replying to Glennzy:
By The VAT Doctor
14th Feb 2013 23:51

Intention of hirer

The VAT Doctor wrote:

Hi there

You are correct that holiday lettings and storage of caravans are taxable supplies. There have been some recent changes on storage, meaning VAT is usually charged.  One obvious exception is the rental of a whole barn for storage, which is still exempt, with an option to tax needed to recover the VAT unless deminimis thresholds apply.

Essentially, provided there is a taxable supply that is compulsory, VAT can be claimed on related costs.

Just on the conversion costs for holiday lettings, the 5% rate may apply if the barn will still be a dwelling for VAT purposes.  Just a cashflow saving though as VAT is recoverable anyway.

Hope this helps.

Sorry, didn't explain this very well.  It depends on the intention of the hirer; if it is clearly storage of goods, then Standard Rating applies.  But if there is a general unspecified use or a use that is predominantly something else, the supply will still be exempt.  Just to be clear, if it is self storage, VAT applies.

Sorry again for the confusion.  Must be Valentines day!

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Replying to Slim Freddie:
Quack
By Constantly Confused
15th Feb 2013 16:40

23:51

The VAT Doctor wrote:

 Must be Valentines day!

With 9 minutes to spare!!! :)

Glad I wasn't misunderstanding the rules.

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By shaun king
14th Feb 2013 13:20

In answer to your question you can register for VAT as an intending trader and recover the VAT you have incurred. If you make taxable supplies in time then there will be no issue but if your supplies were exempt from VAT there maybe a retrospective recovery of the VAT c;laimed.

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By spidersong
14th Feb 2013 18:09

Same question

The law excludes "the grant of facilities for the self storage of goods" from exemption, the notes define it as a "relevant structure for the storage of goods by the person to whom the grant is made" and says a relevant structure is " a container or other structure that is fully enclosed or a unit or building"

A barn is both a fully enclosed structure and a building, so if it's let for the storage of goods then I don't see anything that brings it back into the exemption? (The law does however exclude live animals from goods, and if it's an open sided barn then it might not be fully enclosed but I'd still forsee arguments over whether it's a building or not.

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By The VAT Doctor
15th Feb 2013 15:02

Same answer
See previous

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By helen_r
15th Feb 2013 19:14

BPRA

If the client is in one of the designated areas, then don't forget to look into a BPRA claim.

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By Bob Davies
18th Feb 2013 14:01

Storage of Caravans

I agree with the comments as regards storage rules - but are we not missing the point here the right to park or store a caravan has always been standard rated as one of the exceptions to the exemption.

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By spidersong
18th Feb 2013 14:36

Not necessarily

The exceptions are pitches for caravans and camping facilities not the case here,  or facilities for parking avehicle. Now I don't recall seeing a definition  of vehicle in the group, but elsewhere in legislation vehicles are defined by their passenger carrying capablity, which a caravan doesn't have.

So not a pitch and probably not parking a vehicle, so not one of the exceptions. Although I'm away from the office so I can't check to see if a caravan is legally a vehicle so I could be wrong.

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By cyrynpen
18th Feb 2013 14:42

Can you get BPRA on a furnished holiday let as I seem to think that the HMRC class accomodation used as FHL as a dwelling and therefore BPRA is blocked as BPRA rules state that it can't be used as a dwelling (either pre or post conversion)?

Also can the above farming partnership get BPRA if they are involved with production of primary agricultural products? Such as dairy farmers/beef farmers etc

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Replying to shaun king:
By helen_r
18th Feb 2013 18:23

BPRA

cyrynpen wrote:

Can you get BPRA on a furnished holiday let as I seem to think that the HMRC class accomodation used as FHL as a dwelling and therefore BPRA is blocked as BPRA rules state that it can't be used as a dwelling (either pre or post conversion)?

Also can the above farming partnership get BPRA if they are involved with production of primary agricultural products? Such as dairy farmers/beef farmers etc

I think the rules say you can't claim BPRA if the last use was as a dwelling, but I haven't done one in a while so maybe the rules have been tweaked since then?

And the farm would be ok because BPRA is not claimable if the building is converted/renovated into a building involved in the primary production of certain agricultural products (but I could never find out what certain products meant!)

I really hope you're wrong about HMRC viewing FHL's as dwellings because a few years ago we had a batch of farmers converting old barns into FHL's and we claimed BPRA on all of them!! None of them have had an enquiry so I don't know what HMRC would make of them! There's potentially hundreds of thousand of pounds of underpaid tax if you are right!

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By Bob Davies
18th Feb 2013 15:02

I did consider whether or not a caravan is a vehicle and checked it out and on a recheck Notice 742 para 4.2 - standard rated supplies which says "The provision of storage (or parking) for touring caravans" and this appears to be winter or other storage of a touring caravan.  But I am open to being corrected.

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By djbrown
18th Feb 2013 15:45

VAT Tribunal decision

Per the Tribunal decision of Barry Hopcraft [Barry Hopcraft v Customs and Excise [2004] UKVAT V18590 (04 May 2004) ], caravans were deemed to be vehicles and also capable of being 'parked'.

Regards

Dave

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By mwngiol
19th Feb 2013 14:22

Done the same

"I really hope you're wrong about HMRC viewing FHL's as dwellings because a few years ago we had a batch of farmers converting old barns into FHL's and we claimed BPRA on all of them!! "

Ditto!

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Replying to hapygurl77:
By helen_r
19th Feb 2013 21:24

Worried!

mwngiol wrote:

"I really hope you're wrong about HMRC viewing FHL's as dwellings because a few years ago we had a batch of farmers converting old barns into FHL's and we claimed BPRA on all of them!! "

Ditto!

Have you had confirmation from anywhere that it's correct to do so??

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