I am in the process of buying a property that has been empty for a number of years. Extensive renovation is needed, and I have 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?
The answer is “possibly”. Building work, and the underlying 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. In order 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”, so a signed statement from the man across the road won’t do. Instead, you should look to things like council tax information, electoral register entries, etc. You may also be able to acquire a letter from an empty property officer – in which case you will have an acceptable form of evidence without needing to secure any other paperwork.