VAT relief on house restoration

I am seeking to purchase a small residential property from a family member which will, after restoration, become my primary residence. I currently have a primary residence which will be sold when I transact on this new one. The new property is currently in a state of major disrepair that would prevent me obtaining a mortgage against it. I intend to self-fund the work required to obtain a mortgage, at which point I will purchase the property from my relative with a mortgage. This property has been uninhabited for well in excess of 10 years and a visual inspection would confirm this in the absence of any paperwork or records. It is not clear what records are available to confirm its empty state, but the local council was notified some years ago that it is derelict. It is my understanding that provisions exist to offer restorers of such properties relief on VAT incurred during these restorations. I have the following questions: 1) Can you please confirm what these provisions are and to what extent is VAT relieved? 2) What is considered acceptable proof of the "uninhabited for 10 years" claim? A visual inspection of the property would lead anyone to believe it is true such is its current state. 3) To whom must I provide this proof? 4) From when and for how long can this relief be claimed? Further detail: >> As stated, my intention is to pay for work to this property before purchasing it. This work will enable me to get a mortgage in order to purchase it - will this work be in scope for VAT relief? >> I then intend to purchase the property once a mortgage can be secured against it. It is from this point forward, under my ownership, that the majority of the restoration will take place. However this work could take several years to complete. Is there a limit on how long the relief is applicable for? >> My vision for the property is to extend it significantly, build a separate garage and do landscaping work etc. Is there guidance for which elements of the restoration would be subject to relief and which would not? Thanks.

Hi Ben,
If your having building done to a residential property which hasn't been lived in for 2 or more years then the majority of the work carried out will be charged at the reduced rate of VAT which is 5%.
Please see the guidance below:
Buildings and construction (VAT Notice 708) 8. Reduced rating the renovation or alteration of empty residential premises
Acceptable evidence of the property not being lived in are stated in the guidance below:
Buildings and construction (VAT Notice 708) 8.3.1 The 2-year rule
If the house has been unlived in for more than 10 years then there is scope for claiming incurred VAT on a DIY repayment claim.
There is no timescale for how long the building work will need to take place before completion.
Please see the guidance below:
VAT refunds for conversions if you’re a DIY housebuilder
Thank you.

Thanks for the reply. Do those proof guidelines apply to 10 years uninhabited as well? Also can you comment on my intention to do some work before I own the property? Does that matter? Finally does it matter if - at some stage before the VAT-relievable work is complete - I begin living in the house? Does the relief still apply until work is complete as long as I can prove the uninhabited status at the outset? Thanks

Hi Ben,
For the supplier to charge you 5% VAT on the restoration work then they only need to be satisfied that the house has been unoccupied for 2 years or more.
If you are looking to submit a DIY claim to us then you will need proof that the house has been unoccupied for 10 years or more..
As regards living in the property while the building work is being done please see the guidance below:
8. Reduced rating the renovation or alteration of empty residential premises
Thank you. 

Thank you for your feedback on this. The only original question I have asked which I believe is unanswered is whether it is a problem that I may not own the property when I begin this work. For clarification: >> I will only be able to purchase this property with the help of a mortgage, but it is currently in an unmortgageable condition >> I intend to self-fund repairs to sewerage, electrics and water supply that will make the property mortgageable, and then buy it >> From the point that it is mortgageable and likely habitable, I intend to live in it while the work continues elsewhere Can you confirm whether or not ownership of the property is required in order to claim relief on VAT? Finally, your answer to the "how long can the work take" raises another question. I had outlined how I expect this work to be done in a phased but continual process for a number of years (possibly 5+) until I achieve the final desired result. Throughout that process, tradesmen will come and go for different pieces of work and it is likely that perhaps (for example) the builder who works on the project in the beginning is not the builder who works on it by the end, yet to me the guidance you linked to is not clear on whether those tradesmen - new to the project and involved at a later stage - would be permitted to charge VAT at a reduced rate. Can you please clarify this?

Hi,

The relief available for work on an empty property is available on the basis that the property has not been lived in for 2 or more years. You do not have to own the property for the relief to come in to effect.

Where you are living in the property while the work is being done then, as decribed in the following guidance, the work has to take place within one year of you acquiring the property:

Reduced rating the renovation or alteration of empty residential premises

Thank you.

Hi - in addition to the above can I ask whether it's okay to use more than one contractor? For example if I were to renovate a house that has been unoccupied for 2+ years and use one builder for demolition work (claiming the VAT back for their works) and one for doing the electric work (claiming the VAT back for their works) and another for the plumbing (claiming the VAT back from their works) and another for the window replacements (claiming the VAT back for their works) - all separately? Or can I only do one claim via one contractor? And where in the guidance does it stipulate this please? Many thanks

Hi,

If you are having work done to a residential property which has not been lived in for more than 2 years then the 5% rate should apply to most of the work. You can see the guidance here:

Reduced rating the renovation or alteration of empty residential premises

You can use multiple builders and contractors for the work and each of them would have to meet the conditions as above.

There would be no claim process to recover the VAT as the builders should be charging the correct level of VAT applicable to the work carried out.

Thank you.

Re VAT EXEMPTION Our small but registered charity is about to renovate and alter a grade 2 residential property acquired 4 years ago having secured the required permissions and raised the necessary funding. The charity is not registered for VAT. We understand: 1. the renovation and alteration of a residential property which has not been lived in for more than 10 years before work on it starts may be zero rated for VAT 2. the development of part of such a property exclusively for charitable purposes may also be subject to a reduced rate of VAT 3. the cost and provision of installing disabled facilities is exempt from VAT. The first floor is a one-bed flat declared uninhabitable in 1993 and not lived in nor worked on since then, apart from re-roofing some three years ago, but is now to be completely renovated and altered to become a usable flat. Wholly self-contained, it is accessible directly from a public footpath via its own staircase to its own ground floor front door. The ground floor area has been used wholly as a garage and store for the charity but is now to be developed as a space exclusively for charitable work and will include a toilet suitable for the disabled. Please confirm the VAT position and any requirement for qualifying certificates in respect of the renovation and alteration work to the flat and to the ground floor area. Please also advise whether the VAT charged at 20% by the contractor on the cost of the re-roofing 3 years ago may be reclaimed. Nigel

Hi, We are looking to purchase a property that’s been empty since June 2023. At the moment, we’re still at the early stages and properly looking to receive the keys some time in Winter if everything goes smoothly. By the way, this house needs EVERYTHING doing, both internal and external! If we strip the wallpapers, tidy the garden and other internal works ourselves to get it ready for the contractors and builders for June 2025 which is when the house will be emptied for 2 years. Are we still entitled to the reduced VAT of 5%? We will not be living in the house as it’s inhabitable. Any help would be much appreciated. Thank you Leanne

I understand that with the 2-year rule (Buildings and construction (VAT Notice 708, ch 8) you can only reduce rate the renovation or alteration if, in the 2 years immediately before renovation works start, the qualifying residential premises has not been lived in. Our premises has been empty for more than two years with the exception of a period when we housed a Ukrainian family (under the government’s Homes for Ukrainians scheme) rent free. We had previously had the property on the market and took it off the market in order to house the Ukrainian family; they moved out of the premises a year ago. Would we be able to apply the 2 year rule given the exceptional circumstances, such that the flat only became occupied due to the government’s ask and had previously been empty for two years or so before this? (apologies this is a separate question, not a reply to the other correspondent’s question)

Hi nigelbirkett
Please contact our Charities Team as below:
Charities and Community Amateur Sports Clubs
Thank you.

Hi Leelian,
Please see the following guidance : 
Buildings and construction (VAT Notice 708) Section 8
Pay particular attention to section 8.3.1 which states:
You can only reduce rate the renovation or alteration if, in the 2 years immediately before renovation works start, the qualifying residential premises has not been lived in.
Thank you

Hi Gina,
The rules are very strict for the reduced rated VAT relief for empty residential properties.
The property does need to be empty for 2 years before the work starts with only the exception of:
•    illegal occupation by squatters
•    occupation by ‘guardians’
•    non-residential use, such as storage for a business
Please see the guidance below:
Buildings and construction (VAT Notice 708) Section 8
Thank you

Hi, If a original property owner passed away 4 years ago and one of the children came and stayed at the property occasionally to check on the house and also organising the probate would this be accepted as “guardian” stating at the house and still be eligible for the reduced vat? The property is now going to be sold and requires full renovation.

Hi,

It would need to meet the definition below:

A ‘guardian’ is a person who is installed in a property by the owner or on behalf of the owner in order to deter squatters and vandals. They may pay a low rent on terms that fall short of a

formal tenancy. Alternatively, they may be paid to occupy the property.

The builder completing the work for you would need to be satisfied that all the conditions are met including the role of a guardian.

Please see below:

Reduced rating the renovation or alteration of empty residential premises

Thank you.

Hi, we are renovating a property, that we will live in, and it’s been empty for around 10 years. I’ve asked the council to supply the relevant confirmation from the electoral register but they are taking ages to reply. In the meantime I have a couple of questions as not all of the suppliers and contractors were familiar with this vat relief qualification: 1) please can you confirm how we claim vat back for the materials that we are buying that qualify under the guidance as the builders merchants told me they can’t adjust the invoices. 2) please can you confirm that we just need to ask contractors to adjust the invoices for their work so show 5% vat and give them a copy of the evidence of the qualification for the reduced rate that they can share with the accountant or attach to the invoice? Many thanks Sally

Hi, Our B listed (Scotland) property has two buildings, one adjoining our main property and one slightly separate. They are both derelict and have been unused for 15 years and were in danger of collapse. We are renovating them both. The adjoining one will be residential space and the separate one become a garage and workshop. Can we get VAT relief at either the zero or reduced rate? Thank you.

Hi,
If you are renovating a property which has not been lived in for 10 or more years then you can complete a DIY application to recover VAT which you have been charged. You can see the guidance here:
Claim a VAT refund for a conversion if you're a DIY housebuilder
It is important that the builders completing the work charge you the correct level of VAT as the DIY Team will only repay the VAT which has been charged correctly. Please see the guidance below:
Reduced rating the renovation or alteration of empty residential premises
If a company just supply you with materials then they will need to charge you VAT at 20% and you can then use the above form to recover the 20% VAT.
If a contractor is providing work for you then they would need to charge you at the 5% rate of VAT based on the evidence which you can show them regarding the property being empty.
You will then use the above form to recover the 5% VAT charged.
Thank you.

Apologies in advance for the lengthy question! On leaving the country for a work secondment, I asked someone to housesit - there was a minimal contribution towards bills and they resided there between 2019 and 2023. I have asked another acquaintance to house sit, same arrangement after that until recently when I began a refurbishment of the property. I have not received rent and have continued to pay all outgoings but I simply couldn’t leave it empty due to its age and the possibility of damage or unlawful occupation. I am entitled to claim VAT relief on the basis of the property being empty and what evidence would HMRC require for this? Thank you.