Reclaiming VAT when converting house into two flats

[hmode]

Am I right in thinking that in converting a house into a downstairs and upstairs flat, that I am creating one new residence and therefore can reclaim the input VAT on labour and materials which have been paid? If so, can I choose which is the "new" residence - the upstairs flat will have a loft conversion and therefore will cost more than half of the additional outlay. The house was rented out until recently. Thanks for your help.

[Telometer]

http://www.buildingconservation.com/articles/vatornovat/vatornovat.htm suggests a 5% rate will apply to the whole scheme.

[Tipper]

But if you're doing the conversion for it to be let, ie, as a business, then no, it will be the full VAT rate applying at the time.

[hmode]

I am not VAT registered and am doing the work myself. I thought that I might be able to reclaim the VAT in the same way as the Self Build Scheme.

[chappers2341]

No this is a conversion and as has been said would most probably be be at the 5% rate.
Once this has been established you should instruct any builder to charge you VAT at that rate on his labour, you could make a VAT reclaim on your materials at 10%

[Telometer]

But not on any plant and machinery you may buy.

[chappers2341]

Just to add I would make sure first with HMRC that this is the case, it would depend on the percentage split of the property and the exclusivity of both finished properties. If for example you were to split the volume roughly 50:50 to create two entirely descrete flats then that would be fine.
However if you were to say split the properties with an internal door to create a granny flat they may look at it differently.

[Tipper]

But I'll say it again......NOT if you are doing it for business purposes!:mad:

[Telometer]

But I'll say it again......NOT if you are doing it for business purposes!:mad:

As both converting to sell and converting to let would be business purposes... presumably you refer to the latter.