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We are architects working on a refurbishment project of a house

Customer Question

We are architects working on a refurbishment project of a house in London which was,until our Client's purchased it recently, an HMO (House in Multiple Occupancy). It was a home for up to eight nurses in bedsits working at a nearby Hospital. We are changing it for our Client into his family home.
Does this qualify under HMRC Notice 708 - Section 7.3 for reduced VAT at 5% (or any other VAT regulation) and if so how can we instruct the Contractor that this is the case?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

I agree that you would appear to be correct in your surmise that this work is liable to VAT at the reduced rate of 5%. The regulation reads:

'Qualifying residential premises’ means:

  • a single household dwelling – see paragraph 14.4
  • a multiple occupancy dwelling, such as bed-sits – see paragraph 14.5
  • a building (or part of a building) which, when last lived in, was used for a relevant residential purpose – see paragraph 14.6, and after the renovation or alteration will be used solely for such a purpose – see also sub-paragraph 8.2.1, or
  • a building (or part of a building) which, when last lived in, was 1 of a number of buildings on the same site that were used together as a unit for a relevant residential purpose, and after the renovation or alteration will be used solely for such a purpose – see also sub-paragraph 8.2.1'

You need to issue a certificate to your contractor to the effect that the reduced rate of VAT applies [see paragraph 1.3 of the VAT notice 708].

In reality it does not matter save as regards ***** ***** as, if your contractor's invoices are at 20% VAT, it is simply reclaimable input tax whilst you apply the correct output tax at the reduced rate on your invoices to your client at 5% and recover through your quarterly VAT return. As my old boss was wont to say 'It doesn't alter the price of cheese!'

I do hope my reply has been of assistance.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3131
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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