Reduced Rate VAT

Reduced rating for VAT - planning permission reference point or the actual work being undertaken?

Didn't find your answer?

We have taken on a project to convert 8 "bedits" into 8 1 bedroom flats.  We have looked at the existing plans and layout of the building and whilst they are currently described by the charity that owns them as "bedsits" it is clear that they are actually studio flats and therefore "single household dwellings" as per 14.4.1 of VAT notice 708.  Therefore, per paragraph 7.3.1 of the same notice the number of single household dwellings will not change which  means it is not a qualifying conversion and  we cannot reduce the rate of VAT on the supplies we make.

The architect has now come back to us and said that we are only doing part of the project and that the overall project will mean there are ultimately 24 single household dwellings and currently there are 21.  He then argues that this means it is a qualifying conversion - different from the original argument that bedsits are multi occupancy dwellings!

My problem is that:

- the rest of the building work has not yet got the go ahead even though there is planning in place, which we have now seen and confirms that the number of units that they have been given permission for will increase

- we  have no contract for any additional work

- they could simply  not do the additional work/vary the planning

On that basis, I think we need to base our VAT assessment on the work we are actually doing rather than what may happen in the future and stick to standard rate.

Do others agree?

Replies (3)

Please login or register to join the discussion.

chips_at_mattersey
By Les Howard
15th Oct 2018 19:26

If your work contributes to a qualifying conversion, then the reduced rate must apply. It is not required that you do the whole project.
But I share your caution. The client has to provide more robust evidence that the project does constitute a qualifying project, meeting the various legislative tests.

Thanks (0)
avatar
By 356B
16th Oct 2018 10:28

You have to deal with here and now. IF the project changes, then the VAT position MAY change, but until then...…………...

Thanks (0)
avatar
By VATs-enough
16th Oct 2018 19:12

You say you are involved in turning 8 bedsits into 8 flats. You think your supply is therefore s/rate.
The architect says the overall project is creating additional units, and is therefore a qualifying conversion and subject to 5% VAT.
I thought the rules on this were pretty clear - the reduced rate only applies to parts of the building where the number of units is changing. If the 8 units you are working on are not changing layout to increase or decrease the overall number of units, then your work does not qualify for r/rate.

Thanks (0)