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Claiming input VAT on conversion

Claiming VAT on conversion of school to two residential dwellings

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We are a property developer and build our sites out. We use subcontractors and buy materials direct. We have a development site consisting of the conversion of a school building to two residential unit and the building of 3 new residential units. I am aware of the 5% VAT concession on conversions and have read in a few places that if we are charged VAT at 20% on the conversion part we cannot claim it back - is this true? Presumeably as all the end sales are zero rated we can just claim back VAT as we are charged it at either 5% or 20%?

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By Accountant A
11th Nov 2019 21:00

Another rude freeloader! That's at least 3 today!

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Replying to Accountant A:
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By John Holman
12th Nov 2019 13:44

Not sure what yo mean by this? I'm sorry if I have upset you.

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Psycho
By Wilson Philips
11th Nov 2019 21:56

You can only claim back VAT to the extent that it has been charged correctly, ie at the correct rate. In practice, therefore, if you have been charged 20% when it should have been 5% HMRC will allow a claim for 5% (there are some that believe, wrongly, that VAT charged at the wrong rate is blocked in full).

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Replying to Wilson Philips:
RLI
By lionofludesch
11th Nov 2019 22:01

You can claim the other 15% back - from your supplier.

I'd be wary of assuming that your sales are zero rated. They might be - or they might not. There's not enough information to say.

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By The Dullard
12th Nov 2019 13:59

Assuming an intention to make zero-rated sales (and they appear to be), then you can recover the 20% VAT that you are paying on materials. The sub-contractors should only be charging 5% though, and any excess charged should be recovered from them.

It's best to get these things sorted out at the beginning though, because your subcontractors' subcontractors will correctly be charging your subcontractors 20%, giving them a cashflow disadvantage which they might try to pass on to you by charging you 20% on the incorrect assumption that you can validly recover it.

PS Can I have one of the completed dwellings for free please?

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Replying to The Dullard:
Psycho
By Wilson Philips
12th Nov 2019 14:09

The Dullard wrote:

your subcontractors' subcontractors will correctly be charging your subcontractors 20%,.

No they won't

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Replying to Wilson Philips:
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By The Dullard
12th Nov 2019 14:47

I agree. They won't. Or at least they shouldn't. :) Another confused point; it's just one of those days!

Do I still qualify for the free dwelling?

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Replying to The Dullard:
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By John Holman
19th Nov 2019 14:56

Thanks for your advice - unfortunately we cant afford to give away a free dwelling. Clearly I need to pay for some VAT advice!

Any suggestions?

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