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VAT on conversion/new build

Resolved Question:

I am a sole trader I have recently bought an empty commercial property and have converted the top part into 3 flats I have paid VAT on all the materials can I claim VAT back and how would I do this? these have just been completed. I am also building 5 flats as new build do I have to pay VAT and claim it back? please could you let me know what steps I need to take

The commercial premises is now occupied I do not wish to sell the residential property

Submitted: 1 year ago.
Category: Tax
Expert:  Nicola-mod replied 1 year ago.
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Customer: replied 1 year ago.

If you could find somebody to answer the question that would be great

Thank-you

Expert:  Nicola-mod replied 1 year ago.
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Expert:  Sam replied 1 year ago.
Hi
Thanks for your question
Can you advise whether your sole trader ship is property conversions and can you advise if you are VAT registered.
Did you pay VAT on the purchase of the commercial building - and are the converted flats and commercial property generating rental income - and you do you charge VAT on the rents ?
I can then advise further -
Thanks
sam
Customer: replied 1 year ago.

Hi Sam

I am not VAT registered nor did I pay VAT on the commercial building also I do not charge VAT on the rents.

Thanks

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
Then you cannot claim anything back of the commercial property conversion as this neither qualifies for VAT to be zero rated but can allow just a charge of 5% on the element that was converted from commercial to residential - but you would need to register for VAT - and I should advise if you as general rule do not undertake commercial property refurbs etc - then HMRC will not let you register for purely residential refurbs/new builds.
So you need to get registered for VAT and back date the date of registration - which means you then need to charge VAT on the commercial rents and the sale - so weigh this up carefully.
and
For the new build you intend to take forward, new builds are zero rated - so you should not have a charge in the first instance - however if you choose to register for VAT and HMRC accept that you qualify for this - (as you may not undertake commercial work as a rule) then you can reclaim any VAT charged and you would do this via the contractors for whom you are being charged VAT from - as for the materials if you suffer VAT - then you would merely claim the full cost of the purchase (so VAT inclusive) from the sale of the properties
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13707
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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