It looks as though the housing market is bouncing back after the uncertain events of the past 18 months start to settle.
The Nationwide building society reported that house prices have risen by 13.4% in the year to June 2021, the largest annual increase since 2004!
This in part is due to people reassessing, during and post pandemic, exactly what they want from a home and where it should be located. Another driving factor has been the stamp duty holiday, which is planned for final withdrawal later this year.
As prices soar, increasing numbers of people are venturing into the self build or conversion market to create their ideal homes. Whilst costs inevitably rise on such projects (as Kevin McCloud is always keen to highlight), savings on VAT should not be overlooked.
Whilst new self builds are widely known to be zero rated, a similar VAT scheme is available for conversions of buildings to residential property as follows:
- The property must not previously have been used for residential purposes
- All construction work will be at a reduced 5% VAT rate as opposed to 20% VAT
- Materials supplied with contractor services will also be at 5%
- Contractors cannot choose to charge 20% VAT, if it is a conversion, the reduced rate of 5% has to be charged
- Materials purchased without a contractors fitting service will be at 20% VAT
- On completion, providing the claim is submitted within 3 months, the VAT incurred on construction work and materials can be reclaimed
- The property must be
- Separate and self-contained
- For you or your family to live or holiday in
- Not to be for business purposes (work from home office is ok)
- The scheme does not extend to professional fees, landscaping or certain costs not relating to the structure of the building
- If an incorrect rate of VAT is charged, this will prevent a successful VAT reclaim
The scheme can produce significant VAT savings and record keeping is crucial, along with the timely submission of the claim.
If you would like further details, please do not hesitate to contact Brian Jukes.