I have a client that works from home and is VAT registered. He proposes to build a self contained office to his home and has been advised by the VAT Office that he can claim all of the VAT back on the building costs. He was told that the business use of extention should be less than 10% of the total area. The total building costs have been estimated at £25,000 so the VAT content is quite substantial.
Has anyone any views as to whether this is correct or not?
Thanks in advance.
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VAT on building costs
I am not sure where HMRC's 10% comes from!
However, the test is whether the VAT is incurred for business purposes; if this is fulfilled, then the VAT is deductible. (I did this myself a few years ago!)
Do find out about direct tax implications, such as CGT on the eventual sale of the house - but don't ask me!