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In order to qualify for VAT at reduced rate, the property has to be used solely for a relevant residential purpose. This is explained in Secs 8 and 14.6 of VAT Notice 708 here
Moving one of the walls by a meter as part of renovation would also be subject to VAT at 5% and not 0% if the the conditions as outlined in Secs 8 and 14 are met.
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