Converting a Residential Home to Apartments

Converting a Residential Home to Apartments

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Just wanting a bit of confirmation on something I don't normally deal with.  My client, DevCo, has purchased an old residential home and is in the process of gutting it and refitting it to be sold as 9 separate, self contained apartments.  They'll be sold individually to separate punters once complete.

Whilst DevCo has just this project on board at the moment, it has done a variety of work in the past, as a result of which it is VAT registered.

DevCo has contracted out some of the work to ConCo (unrelated to DevCo), who are disputing whether the reduced rate applies.   Whilst some of the residential home was used for offices and so on, there were 23 bedrooms, plus all the communal areas, kitchens and so on and this was very substantially used for the permanent home of elderly people.   Difficult to put a figure on it now it's gone, but I'd guess more than 90%.

As a result, I'm pushing for 5% VAT.

The sale of the completed apartments by DevCo to the punters would seem to be an exempt supply of land as long leases.  As a result, I'm thinking I'd be better off not attempting to reclaim any VAT here - the chances of it not being attributable to an exempt supply seem remote.

Any thoughts and comments very welcome.

Replies (6)

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chips_at_mattersey
By Les Howard
30th May 2016 17:34

I would lean towards the reduced rate for the conversion works. It is a 'changed number of dwellings' conversion. The pre-conv building is an RRP. Post-conv it is a number of separate dwellings.
Of course, you will need to check the usual contracts, Planning Permissions, etc.

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Replying to leshoward:
RLI
By lionofludesch
30th May 2016 18:40

Les - you're a lifesaver. I was beginning to think all the VAT experts were on holiday.

So exempt sales, reduced rate conversion costs. That's grand.

I'm quietly confident that this is an old folks' home converted into nine apartments - is this what you were referring to when suggesting that I reviewed the contracts and planning permissions.

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chips_at_mattersey
By Les Howard
30th May 2016 22:00

Correct. But you should check the conditions for the 5% rate, so your can satisfy ConCo. They will probably need 'chapter and verse' for their peace of mind.

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RLI
By lionofludesch
31st May 2016 07:30

Thank you, Les.

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By carlh
31st May 2016 17:20

Should have done a cap allowance claim on the property, if not done already.

resi homes get 30-40% claim pool.

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Replying to carlh:
RLI
By lionofludesch
31st May 2016 17:39

carlh wrote:

Should have done a cap allowance claim on the property, if not done already.

resi homes get 30-40% claim pool.

Capital Allowances ? This is trading stock, bought to gut and sell on. It's not a fixed asset to DevCo.

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