Q&A: VAT rate on empty property building work

Q. I am in the process of buying a property that has been empty for several years. Substantial renovation is required, and I’ve been speaking to a contractor who says that he will be able to charge just 5% VAT for the work. I don't want to fall foul of HMRC, so is this correct?

A: The answer is "maybe". Building work, and the associated materials, can be subject to VAT at 5% if the building is a dwelling that has been empty for at least two years. However, any professional fees - such as designers or architects - will be subject to VAT at the standard rate. To qualify for the 5% rate, you will need to give the contractor third-party evidence to confirm the empty period. This must be from a source HMRC considers to be "reliable", such as council tax information, electoral register entries, etc. You may also be able to acquire a letter from your local authority’s council’s empty property officer - in which case you will have an acceptable form of evidence without needing to secure any other paperwork. You can find further information on VAT relating to the building trade here.

About the Author

Paul Newbold

Partner

After qualifying with KPMG where he gained significant audit experience, Paul joined Torgersens in 1991 and became the firm’s audit partner in 2000. Paul employs his broad range of financial skills to provide commercial and accounting advice to a range of owner-managed businesses in the independent retail, education and professional services sectors. He also has extensive experience dealing with charities, Registered Social Landlords and not-for-profit organisations and co-operatives.   Outside of work, Paul likes to visit Eastern France and South-West German and read novels by David Morrell, Michael Blake and Harper Lee. He also likes watching films, his favourite is The Shawshank Redemption.

To get in touch please e-mail paul.newbold@torgersens.com.