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We have recently bought a residential building in London,

Customer Question

Hi, we have recently bought a residential building in London, which is currently an HMO + a separate caretaker flat. We are planning to convert this property into 5 self contained flats (so 4 will be created out of the HMO, + 1 out of the conversion of the caretaker flat). Would this conversion attract a reduced VAT rate of 5%? thanks
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. This is covered by VAT Notice 708 which you can find here: https://www.gov.uk/government/publications/vat-notice-708-buildings-and-construction/vat-notice-708-buildings-and-construction The renovation or alteration of empty residential premises attracts the reduced rate of 5% VAT. Alternatively conversion (other than for housing associations) of a non-residential building into a qualifying dwelling or communal residential building and conversions of residential buildings to a different residential use also attracts the reduced rate. The Notice cautions you that you may well have to tell your builder that the reduced rate of VAT applies. From the tenor of your question you should be entitled to the reduced rate. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.
Thank you for your reply. Maybe I have not been very specific in my question. I did read VAT notice 708 before contacting you. What i would like to have is a confirmation of the correctness of my understanding, based on the information provided, as follows:
- in our specific case, chapter 7 would apply: Reduced-rating the conversion of premises to a different residential use
- more in detail, in order to be considered a qualifying conversion, chapter 7.3 would apply: Conversions into single household dwellings, since after conversion "the premises contains a greater or lower number (but not less than one) of ‘single household dwellings’ "Please let me know if, based on the information provided, you would agree with my understanding of the specific case, thank youCarlo Arosio
Expert:  bigduckontax replied 1 year ago.
In my opinion Carlo this conversion would attract VAT at the reduced rate, but you must ensure that the contractor undertaking the works is aware of the position and charges the 5% rate. The concept of the reduced rate is to assist in the creation of housing stock.
bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Customer: replied 1 year ago.
thank you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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