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Reduced Rate VAT

05/03/2018 10:46:22
Received from Janet on 01/03


Subject: Partially exempt VAT
I would really appreciate some help with where to get some information from on how I can reclaim VAT in the following circumstances:

We are a very small development company either renovating existing dwellings or building one-off new builds.

However, we are currently converting an agricultural building into a new dwelling. and in these circumstances the final sale is zero rated.

In addition, I believe that we only need to pay the reduced rate of 5% VAT on applicable purchases (where we would normally pay 0% on new builds). This could include, for example, materials which constitute the main fabric of the building (bricks, etc..) but not for non-eligible purchases (carpets & white goods, etc..). I can get the lists of what is and isn't eligible from your web site - that isn't the issue.

As I understand it this means that during the build, when I submit my period VAT return that we can reclaim our VAT during the build (on applicable purchases) where suppliers have charged us the full rate of 20%.


Obviously we will ask suppliers to charge us at 5% where possible. However some suppliers won't do this, for example we might get supplies from somewhere like B&Q where we will be charged 20% VAT or from smaller suppliers who are not willing to risk being fined for charging the wrong VAT rate.

My question:
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When a supplier charges me 20% VAT but should only have charged 5%, can I reclaim 15% of any relevant purchases on my VAT return for that period?

Example: If an eligible net invoice is £100 and a supplier charges me £120 (ie: £100 + VAT at 20%) then can I reclaim £15 on my VAT return as I should only have been charged £5?

Many thanks for any input, kind regards, Janet
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Re:Reduced Rate VAT

05/03/2018 12:37:44
Hi Janet

The service of converting a non-residential property into a dwelling can be 5% it just so happens if you supply and install goods at the same time then this can also be reduced rated, if goods are supplied alone, without installation then they are always standard rated regardless of what they are used for.

Regarding recovery you can only claim back VAT on your VAT return that has been correctly charged, if they were correctly charged 20% from B&Q (most likely they were charged correctly unless B&Q installed the materials at the same time) then it is all recoverable through normal input tax rules as per VAT notice 700 section 10 as long as there supply is the first time sale of a dwelling or converted dwelling.

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