Repairs prior to change of use

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A client has a traditional farm building and have obtained planning permission to convert into a dwelling. 

The slate roof needs repaired/repalced, rotten timbers, missing slates etc. 

My understanding is that the roof dilapated while the builing was in agricultuiral use and hence the repair would be an allowable revenue expense to the famring trade and VAT would be recoverable. All this would be completed prior to comencement of the conversion to a dwelling. 

I'm struggling to find any concrete guidance to support this if anyone can assist? 

Thanks

Replies (6)

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paddle steamer
By DJKL
04th Jun 2024 18:07

Would roof be precisely the same (height/windows in same positions , no extra windows etc)?

How did it get dilapidated- long period of ownership within the farm business?

Has it actually been used by farm business in living memory or has it just been on the land?

What is planning position re barn, has planning been applied for pre the works? (suggests it has)

What is happening post build, is it to be sold? If not how is vat being managed?

Do you have an appropriation to trading stock re property development?

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Replying to DJKL:
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By FrankTax
04th Jun 2024 22:59

Thanks for your thought provoking questions, answered below.

Would roof be precisely the same? - Yes

How did it get dilapidated- long period of ownership within the farm business? - Yes

Has it actually been used by farm business in living memory or has it just been on the land? - Originally cattle housing and latterly/currently storing, tools, machinery, fencing materials etc.

What is planning position re barn, has planning been applied for pre the works? (suggests it has)- I'd need to check, full planning has been granted for the conversion.

What is happening post build, is it to be sold? If not how is vat being managed? - Most likely sold, possibly let.

Do you have an appropriation to trading stock re property development? - Haven't fully considered that.

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VAT
By Jason Croke
04th Jun 2024 20:45

What is the intention for the dwelling? To sell or to rent?

That will determine the VAT recovery treatment, I'm not buying the idea of reclaiming VAT based on last/historical use when the VAT incurred is clearly going to be for a future purpose unconnected to farming.

It'd be like converting an old office space to use as an exempt nursery/crèche but because the building used to be an Accountants office then the refit is allowable for VAT on what will clearly be an exempt business activity going forwards.

As the planning consent has been granted, how will you reclaim VAT based on previous agriculture use? Even had you done the repairs first and then obtained consent with a change of use, depending on that change of use, could see input tax clawed back if that use will be an exempt one (either under claw back rules or capital goods scheme).

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Replying to Jason Croke:
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By FrankTax
04th Jun 2024 23:20

Thanks for you reply and views on repair of historical use.

Probably to sell, but possibly let.

So I think VAT approach would be:
5% charged by contractor on conversion.

If sold would be zero rated so VAT would be recoverable

If let would be exempt but (in theory) potentially some VAT recovery via partial exemption in relation to partnership land and property income.

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Replying to FrankTax:
VAT
By Jason Croke
05th Jun 2024 07:29

I agree with that conclusion/summary.

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Replying to Jason Croke:
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By FrankTax
05th Jun 2024 09:10

Thanks

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