VAT refund on conversion of property

VAT refund on conversion of property

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Client has purchased a commercial premises with a flat over which had been empty for over 2 years and is in the process of finalising the conversion of the downstairs into a flat He intends then to rent out both properties. My understanding is that the conversion will qualify for the 5% VAT rate and he can the claim a refund of VAT paid on building materials. The notes attached to form 431C are ambiguous

Am I correct ?

I tried talking to HMRC and couldn't even get to a person as got the message " we are extremely busy at this time please call back later"   

Replies (4)

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chips_at_mattersey
By Les Howard
04th Jun 2015 12:13

Conversion

Form VAT 431C is only relevant if the client is going to live in the flat after conversion. It cannot be used where the flat will be rented out.

The 5% rate will apply to the conversion of a commercial premises (or part) to residential, irrespective of the 2 year rule. The 2 year rule applies to an empty residential property. You will therefore need some evidence, for example, from the Local Authority, to demonstrate that the flat has been empty for at least 2 years.

But, there are various rules applying to the 5% rate, so it would be worth seeking specific advice; and have someone look at the terms of the Planning Permission, etc.

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By bernard michael
04th Jun 2015 16:29

Thanks for the advice. I now understand the client did the conversion without planning permission so life could get sticky

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chips_at_mattersey
By Les Howard
05th Jun 2015 10:20

Planning Permission

Both 0% and 5% rates depend in part on compliance with Planning, so there may indeed be a problem.

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By bernard michael
05th Jun 2015 11:15

I thought so

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