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VAT reclaim for conversions - what rate applies to this job?

Discussion in 'Building' started by cjard, 15 Sep 2014.

  1. cjard

    cjard

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    VAT for conversions seems to be a reduced rate of 5% (that you then reclaim) rather than 0% as it is for new builds, if a supplier is bringing goods and installing them - for example the timber frame or the electricity supply guys have told me their rate is 5% and I'm supposed to confirm this with a certificate. It's also quite clearly a supply and fix because I'm not qualified to install electricity cables, and I'm not going to be lifting the timber frame panels into place...

    ..but then a question arose in my mind; what's a concrete foundations pour classed as? The concrete co are bringing the concrete and pouring it into the foundations so technically, they're installing the building materials that they're providing. Does it then make a difference if I so much as touch it with a rake? Did I become the installer if I levelled it out, or is there some reasonable amount of work the self builder has to perform on the concrete before the readymix co became "just the supplier" of the material? As far as I can tell, different VAT rates apply, you see - if they install it it's 5%, if I installed it, it's 20%
     
  2. theoldun

    theoldun

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    Is the conversion a non residential building, such as a cattle barn.
    oldun
     
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  4. jeds

    jeds

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    Are you VAT registered - to charge yourself VAT?

    I'm not a VAT expert but I do lots of valuation certificates for conversions and new builds. On new builds I would certify zero VAT and nothing would be added to the contractors valuation. On conversions I would certify and add 5%. In both cases the contractors still pay 20% VAT on any materials they purchase - but they get that back from the VAT man when they do their returns. If the client purchased, say, a kitchen or something like that outside of the contract he would have to pay 20% VAT. But he can also then reclaim that from the VAT man. Usually this happens at the end of the contract but I have known some claim it in two or three lots.
     
  5. cjard

    cjard

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    Following up on this, post another call to HMRC

    The VAT rate for "services in the course of construction' of new builds is 0%
    The VAT rate for "services in the course of construction' of 'a qualifying conversion' is 5%
    The VAT rate for building materials is 20%

    VAT charges for "services in the course of construction" is not reclaimable

    -

    This means:
    If a timber frame co would charge 50K for material and 50K for erection then:

    If the house was a new build, erecting a timber frame is a "service in the course of construction" the bill should be 100K + VAT (at 0%, not reclaimable)

    If the house was a qualifying conversion, erecting a timber frame is a "service in the course of construction" the bill should be 100K + VAT (at 5%, not reclaimable)

    If the house was a new build or conversion, SUPPLY ONLY of a timber frame is me purchasing building materials, and the bill should be 50K + VAT (at 20%, reclaimable)..

    -

    So what I want to know is, can I ask the TF co to itemise the invoice like this:

    50K + 20% VAT for materials
    50K + 5% VAT for the service of "turning materials into a house"

    rather than:

    100K + 5% VAT for supply and erect

    Or even better, give me two invoices so I can then claim the 20% back on the materials?

    Because, though I have to pay 10 grand out in vat if the invoice is split, I can reclaim this, so all I ultimately pay is 2500 (5% vat on 50K services) that I cannot reclaim..
    ..and this is better than paying 5% on 100K for services, and being 5000 out of pocket for VAT rather than 2500 and thus taking a 2500 quid punch on the nose from HMRC
     
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