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Not really a green issue but very probably of interest to lots of self builders and restorers.I,ve taken a year out to renovate a house that I've bought thats been empty for over 2 yrs.I,ve always been self employed but not vat reg.If I register for vat and oversee the renovation work using subbies (effectively starting my own building company) it seems to me that I can reclaim the 17.5%vat on all materials and labour and charge myself vat at 5%, therfore recovering approx 12.5% of the total costs from HMRC.Ref notice 708 section 8. As the budget for renovation is approx £60k this is a substantial ammount. Can't see anything in the notice that says you can't own the building.Will obviously talk to the VAT office but would value any take that anyone out there has.
They will not let you register unless you are genuinely starting a business. They will want to see evidence that this is a genuine business. Note also that if you trade as a contractor you will have to comply with CIS which means you would have to deduct tax from all your subbies wages and deal with al te admin that entails.
All in all I doubt if all the hassle will make this worth it. Far better to come to an arrangement with a friendly builder.
You can get all the VAT back if it is business activity and you are a net payer of VAT; this would then come under the partial exemption rules which are complicated and the business would need to own the property.
I think I would contact the VAT help line. Ask if the VAT refund scheme for self builders covers this. For some reason they withdrew Notice 719 that was aimed at self builders but it says...
"The Refund Scheme puts DIY builders and converters in a broadly similar position to a developer..."
I would try asking if the refund scheme also applies to DIY rennovation of empty property as mentioned in 708 section 8.1 (5% rating on properties that have been empty for 2 years).
Ask for a call reference number when you phone them. They may say they need to phone you back but I found they were one of the better call centers to deal with.
PS: My old copy of 719 doesn't mention empty properties however it does cover conversions which are rated at 5%. Personally I wouldn't mention that as they will point out that properties being converted must not have been used as a dwelling for 10 years.
Then take everything they say with a pinch of salt unless you have it in writing and even then be careful. Our company writes cpd training for customs and excise and their telephone support staff are not exactly trained at all, they'll just use the same material you have access to and interpret in their own way, which may or may not be right and information gleaned from them does not stand up in a court of law when you are trying to defend your illegal actions :)
I got 3 different responses on 3 different calls from HMRC regarding VAT on recombining a property split into 2 with one half left derelict for over 15 years. One told me that being empty for 2 years meant it qualified for a VAT refund under 708. One told me it didn't because it wasn't a children's home or residential care facility. The 3rd and frankly most helpful reply came in the form of a quote on the policy - to paraphase 'VAT is a self certified tax and it is up to the VAT registered business to interpret the rules. HMRC will only give a legal opinion during a VAT audit if they suspect deliberate fraud'.
Setting up a company to act as main contractor on the project may not be a bad idea, but you have to balance the hassle of setting up a VAT registered business, administering the accounts and rules + accountancy costs against the saving you may make. Also if you buy goods through the business you will loose all _consumer_ protection on purchases (e.g. distance selling) so one wrong move could leave you stuck with a big bill for something that you could have claimed a refund for.
Thanks for all your comments, very helpful. Previously ran a VAT reg business and always done my own accts and tax return, so that side doesn't bother me.Realise I will have to charge myself VAT at 5% on the labour of the small builder I'm going to use (who isn't vat reg) but the savings on the rest of the budget (I'm buying all the materials and the other services) should save me approx 8 to 10k.Think it's worth doing and it doesn't seem to be against HMRC rules.I'm self employed at the moment because I'm not eligible for jobseekers and need to pay my stamp so it seem perfectly feasible for me to start a building business , and who knows, it may lead to bigger things. Obviously very important to make sure that anyone I use has builders insurance. Seems if I take it out on my own behalf it doesn't cover property owned by me.I decided to go this route cause the majority of builders i had round wanted to renovate a 250 yr old stone house with cement and plasterboard, and they seem to be the two main things that have caused all the problems with the house.Starting this week so if anyone is interested I'll post some links to the progress.
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