A reduction of VAT from 20% to 5% on all direct materials (that are integral to the building) and labour used to “refurbish” property will be available whereby property is either:

–  an empty property and has been so for 2 or more years

– a building being converted from a commercial unit to residential

– Changing the number of dwellings (up or down in units)

You do not need to be VAT registered to benefit from this VAT reduction. Your suppliers (builders and associated trades) will need to adjust their invoices to show the VAT rate at 5% instead of the usual 20% – this is not a relief you claim retrospectively to paying your builders at 20% VAT but instead, they only charge you VAT at 5%

Please note that the 5% VAT is achievable only on conversion works labour and materials) and not professional fees like architects, project management, survey costs etc. The reduction of VAT rate from 20% to 5% cannot be claimed on soft furnishings such as carpets, cushions, bedding etc. Additionally, the VAT rate reduction cannot be applied to freestanding items such as non-integrated fridges, cookers etc. Finally, VAT cannot be claimed back on TVs, videos or other lifestyle electrical appliances.

Please note that your builder/tradespeople must buy and fit the materials. No VAT may be claimed back by the property investor at any time.

There have been many suppliers and accountants that are unsure about this ruling and may push against it. You can share this email and the link to the section VAT Notice 708: buildings and construction.

See our article for more details on the subject about VAT on residential property investments.