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More on VAT

When can input vat be claimed on farmhouse repairs and improvements

Farmhouse repairs and improvements

In order to simplify matters for the vast majority of farming businesses, HMRC have issued guidelines relating to how VAT incurred on the general repair and maintenance of farmhouses should be treated. Their policy is to allow 70% of input VAT suffered on such expenditure to be reclaimed without any detailed explanations having to be provided, so long as the following factors are all present:
  1. The property must be a typical working farmhouse
  2. The business must be that of a full-time farming activity
  3. The work done must be in the nature of repair and/or maintenance of the farmhouse
Farmhouse repairs and improvements

These relaxed rules do not apply where the farming activity being carried on is not a full-time activity, or where the farmhouse is primarily a family home rather than a working farmhouse.

It only applies to works of repair and maintenance and not to anything that is in the nature of an extension or improvement of the farmhouse.

Where HMRC come across a case like this, they are prepared to enter into negotiations with the taxpayer on an individual basis, but in general will not be prepared to accept a claim for more than 40% of the input tax to be recovered unless there are very good reasons for doing so (and HMRC do not give any information about what such reasons might be).

Conversion of buildings to residential use

Where buildings previously in use for commercial purposes are converted into residential accommodation, any works in making the conversion qualify for a special reduced VAT rate of 5%.

Where it is possible to claim that the 5% VAT rate should apply to such work it is important to ensure that you are only charged those rates on qualifying work by contractors. This is because HMRC will only repay 5% if that is the VAT rate that should have been applied, leaving the taxpayer to deal with the other 15% in negotiations with the supplier.

Conversion of buildings to residential use – what qualifies?


The reduced 5% rate can be used where, following the work that has been carried out, there are a different number of what are known as “single household dwellings” than there were before the work started. This means that it covers the following:
  • Converting a house into flats
  • Converting a block of flats into a single house
  • Changing the number of flats in a block
  • Converting a property that has never been lived in before (this includes office and barn conversions)
  • Reconverting a previous dwelling that has been at some time in the past adapted to another use, such as offices
It does not cover the creation of additional living accommodation that does not amount to a single household dwelling, so it rules out adding a “granny annexe and additional bedrooms in a care home. It also does not cover living accommodation that has been used for other purposes without any adaptations being necessary, such as using a flat above a shop for storage purposes. However the reduced rate can still apply in some circumstances if the accommodation has not be lived in for at least two years.

What work is subject to 5% VAT rate?

There are clearly defined parts of a building project that can have the reduced rate of VAT applied to them. It includes:
  • Any work on the fabric of the building, including repair and maintenance work
  • Means of proving water, power, heat or access
  • Means of providing drainage and security
  • Waste disposal
  • Construction of a new detached garage or conversion of existing outbuilding into one, including any drive serving the garage but only if done at the same time as a qualifying conversion
The standard rate of VAT must be applied to the following work:
  • Goods that are not building materials such as carpets and fitted furniture
  • Erecting and dismantling scaffolding
  • Hire of goods
  • Landscaping
  • Professional services such as architects, surveyors and consultants
Check back in next week for advice on holiday and commercial lettings.

For further information on any of the elements raised within this article contact us today.

Andrea Wulff 01243 531600
[email protected]