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Continuing my furnished holiday lettings 'journey'

VAT reclaim on conversion from non residential use

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If a building (in this case a small barn) is converted to one single property - with the intention of then using it for furnished holiday letting:

1) I think I should be able to issue a certificate saying the development is eligible to be invoiced at the reduced rate of 5%

2) I cannot reclaim the VAT under the DIY housebuilders scheme as I intend to use the building for business, but:

3) As I am registered for VAT for another commercial building, I should be able to reclaim VAT on this conversion - but then of course my FHL letting income would be VATable.

Am I right on each count?

Thanks

 

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RLI
By lionofludesch
29th May 2020 18:43

3. If you're registered for VAT, the income from your furnished letting will be chargeable to VAT.

Whether you reclaim VAT on the project or not.

Your registration covers all your business activities.

You may wish to rethink questions 1 and 2 in the light of this.

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Replying to lionofludesch:
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By tom123
30th May 2020 12:26

Yes, I get that vat will apply to the income.

Does that mean the reduced rating does not apply?

I am concerned about not being able to claim vat back if it is incorrectly charged

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Replying to tom123:
RLI
By lionofludesch
30th May 2020 15:28

Ah - right, I thought the last part of Q3 implied that you thought you had some choice.

1) I think I should be able to issue a certificate saying the development is eligible to be invoiced at the reduced rate of 5%

I wouldn't be so sure. Have a look at para 14.2.1 of notice 708. Are there any planning restrictions ? Could you sell this as a dwelling ?

2) I cannot reclaim the VAT under the DIY housebuilders scheme as I intend to use the building for business

No.

3) As I am registered for VAT for another commercial building, I should be able to reclaim VAT on this conversion - but then of course my FHL letting income would be VATable.

Yes, VAT and agent's fees, if you use one, are going to take a big chunk out of your rental income.

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