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Self Build claim VAT back on Tools

I want to know if theres a way to reclaim the VAT spend on tools?

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Hello all,

I am a bonafide idiot when it comes to tax and need some help.

I undertook a self build project a couple of years ago converting a church into a dwelling. I understand that the VAT on the building materials can be reclaimed at the end of the project, however along with materials I have been purchasing quite a few tools and I was wandering if there's a reasonable way to claim the VAT back on those purchases.

I registered as Self Employed at the start of the project as I have been working full time on it and initially thought I could register for VAT and claim everything back through that avenue but upon further investigation discovered that I'd have to take the 'option to tax' route on the property itself which would make it impossible to sell. I then resigned myself to leaving it till a later date. Now I'm nearing the end of the project I want to understand my options.

Beyond this project I will be continuing with property renovation/small building projects so the tools I currently have will likely be joined by more in the future. I would like to not have to start adding VAT on to invoices for clients but at the same time I'd ideally like to be able to recover as much of the VAT from the project as possible with as little faff as possible.

 

If someone could spare the time to point me down the correct path for this I'd be very appreciative. Thank you

Replies (10)

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By Adam12345
13th Sep 2019 16:13

Probably (definitely) best you get an accountant or tax adviser.

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RLI
By lionofludesch
13th Sep 2019 16:43

You can't opt to tax a dwelling.

It's likely to be exempt - which means you can't reclaim any VAT; exempt is different to zero-rated, which is a common misconception.

If it's been empty a Long Time, you might get some VAT back. Or get charged at a reduced rate. But to do that, somebody would need to build it for you. Any bricks and timber you buy would still carry 20% VAT.

You definitely need an accountant. This could cost you thousands. A few quid VAT on tools is the least of your worries.

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Replying to lionofludesch:
Psycho
By Wilson Philips
13th Sep 2019 16:49

lionofludesch wrote:

You can't opt to tax a dwelling.

Semantics, perhaps, but yes you can.

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Replying to Wilson Philips:
RLI
By lionofludesch
13th Sep 2019 23:37

The general thrust of my reply is in the reference to getting an accountant.

Anything else is a distraction.

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Hallerud at Easter
By DJKL
13th Sep 2019 16:48

Very mixed up- self build is re residential for own use as a house yet you mention Option to Tax which relates to commercial property.

You are obviously doing work on something with a view to a profit.

So -basics

1. What was property you are working on before you started working on it?
2. What will it be when you have finished working on it?
3. Who owns said property?
4. What do they intend to do with it once works completed?

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By Jack the Self Builder
13th Sep 2019 17:07

Thanks for the replies. Sorry if I've thrown people off with my mix up regarding the option to tax. As previously stated. I'm an idiot.

To clarify a few things:
The property was a church
It will be a single residential dwelling when complete
I own the property
Ultimately the property will be sold with a view to making a profit but will be lived in until the next project is found

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Replying to Jack the Self Builder:
chips_at_mattersey
By Les Howard
13th Sep 2019 18:08

I echo the previous comments. You should urgently appoint an Accountant!

VAT does not work well when you live in a property before selling it! If you do try to register for VAT HMRC might refuse your registration, or they might reject your VAT claims.
Proper advice at an early stage would avoid all this hassle. You would then not be an idiot!

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By Jack the Self Builder
13th Sep 2019 19:01

Thank you again to all who took the time to reply.

After some further reading my understanding is that because the project is converting a church then it is 0% rated and because this whole endeavour was undertaken to make a profit that makes me a Property Developer meaning the best course of action is to register for VAT with HMRC in order to recover the 20% on materials etc. and then sell the property once completed to avoid possible complications and that there will be no VAT on the sale of the property because residential properties are exempt.

This has also highlighted how little I know so I will be following the advice and appointing a pro to help me.

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Replying to Jack the Self Builder:
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By Adam12345
13th Sep 2019 19:34

There is a VERY big difference between exempt and zero rated supplies. Please engage an accountant otherwise it may end in tears.

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Replying to Jack the Self Builder:
RLI
By lionofludesch
13th Sep 2019 23:41

Jack the Self Builder wrote:

Thank you again to all who took the time to reply.

After some further reading my understanding is that because the project is converting a church then it is 0% rated and because this whole endeavour was undertaken to make a profit that makes me a Property Developer meaning the best course of action is to register for VAT with HMRC in order to recover the 20% on materials etc. and then sell the property once completed to avoid possible complications and that there will be no VAT on the sale of the property because residential properties are exempt.

This has also highlighted how little I know so I will be following the advice and appointing a pro to help me.

I'd echo the above comment. You've not cottoned on to the message about "exempt" not being the same as "zero rated". At one point you say it's "0% rated" at another you say "exempt".

There's no VAT on either sale. But if it's exempt, you can't reclaim the VAT.

I took over a case like this a couple of years ago where a trader had to repay some £9000 in wrongly claimed VAT as a result of advice from a firm large enough to know better.

Take advice. Now.

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