Hi.The basic rules which govern the VAT rating of labour and materials costs in relation to a new residential property are set out here. VAT Notice 708 here has the detailed rules.If you look under the heading "What is a new construction?", it gives some example scenarios. As you appear not be planning to demolish everything that is currently on the site, that is probably the reason the builder has given you a quite with VAT included. If you ask the builder why VAT has been added to the quote, you will have a better understanding of his reasoning and will be better placed to determine if he is correct or not in his understanding of the VAT rules in relation to new builds. It's not unknown for them to get it wrong but the whole area is a minefield of odd rules.My own view is that you will need to demolish the extension that remains.I hope this helps but let me know if you have any further questions.
Thanks for that. VAT Notice 708 is certainly a migraine inducer, as it seem to contradict itself but re-reading the relevant sections I can see where you're coming from.