Thursday, 3 March 2016

How to pay 5% Vat when renovating your Warrington investment Property.



Over the weekend I got chatting to a landlord who is currently renovating a few properties in Warrington. She is a keen reader of the Warrington Property Blog, so instantly we started to talk about the local market.

She mentioned something about paying VAT at a reduced rate of 5%. I was intrigued and needed to know more… and I thought my readers would love to know about this.

What renovations qualify for only 5% VAT?

If you are buying a home that has been empty for two years, then you may be eligible for the reduced rate of VAT (currently 5%) on works carried on at the house.

Basically, your contractor can invoice you with the reduced amount provided he/she is supplying and fitting.

So what types of properties qualify?
  •           Single household dwellings;
  •        Multiple occupancy dwellings, such as bed-sits;
  •        A building (or part of a building) which, when last lived in, was used for     a relevant residential purpose
  •      A building (or part of a building) which, when last lived in, was one of a       number of buildings on the same site that were used together as a unit       for a relevant residential purpose


Summary of Discount

You must use a VAT-registered contractor to be eligible for the discount.

Your contractor can charge VAT at the reduced rate of 5% if they are renovating or altering an empty home that has not been lived in during the 2 years immediately before the work starts – providing they supply and fit.

You will also need to ensure that your contractors understand the reduced VAT rate rules so that they invoice you correctly.


The two year rule

The renovations or alterations can only have reduced rates if in the two years immediately before works start, the premises has not been lived in.

The property must have been continuously empty for the two years prior to the work starting.

If the dwelling has been lived in on an occasional basis (for example, because it was a second home) in the 2 years immediately before work starts then services cannot be charged at reduced rate.

If, once the works have started, the dwelling is lived in again; the work is still eligible for the reduced rate.

Types of occupation which can be ignored are:

  •          illegal occupation by squatters; and
  •          non-residential use, such as storage for a business.


Proof of two years empty

Your contractor needs to be able to show HM Revenue & Customs evidence that the property has been empty for two years. Your Empty Property Officer can provide a letter documenting the last date of occupation of the property.

Where an Empty Property Officer is unsure, HM Revenue & Customs may accept a best estimate and call for other supporting evidence.



If you would like more information on this feel free to email me and I can point you in the right direction to other articles which go into more detail on this. It’s also worth speaking to your accountant to see if they know about this. If they don’t, then contact me. As I’ve stated above, I will forward more articles explaining this in much more detail.

As always you can contact me by phone on 01925 235 338 or email which is 
manoj@hamletwarrington.co.uk
alternatively if you are passing the area then pop in for a chat we are based at 6 Bankside, Crosfield Street, WA1 1UP (the kettle is always on)
Don't forget to visit the links below to view back dated deals and Warrington Property News.