Property & VAT

The VAT rules around land & property are very complicated, and I outline a very brief overview of some important considerations but as always it is vital to seek professional advice before starting any new project.

The general principle is:

Sales of new build residential property are zero rated

Sales of new commercial buildings are standard rated

Sales of all buildings more than three years old are exempt (unless the vendor has exercised the option to charge VAT)

SOME conversions and renovated properties are also zero rated

The distinction is very important  because if you are providing exempt supplies it means you cannot recover the VAT you incur on build costs (unless you opt to tax)

Reduced Rate Supplies

In some circumstances the renovation or build costs may be charged at a reduced rate (5%). Examples of this include conversions to:

a ‘single household dwelling’

a different number of ‘single household dwellings’

a ‘multiple occupancy dwelling’, such as bed-sits

If you buy a house that has been empty for 2 years or more and live in it while it is being renovated, subject to certain conditions

Detailed conditions need to be met before the builder can supply reduced-rate services.

Zero Rated Supplies

In some circumstances the builder may be able to zero rate his supply for example  a conversion of a non-residential building for a housing association or making alterations to suit a disabled person.

Again detailed conditions need to be met before the the builder can zero rate his supplies.

The supply of architectural, surveying, consultancy and supervisory services is always standard-rated.

I must stress again, this article is a cursory very brief look at SOME of the main principles regarding VAT and development of property, professional advice should to be sought in all cases.

If you need help and advice please do not hesitate to contact me on [email protected] or visit my website pmarks.co.uk


Paul Marks & Co Chartered Accountants is the trading name of Paul Marks Ltd a Limited Company registered in England and Wales (registered number 4487645). This article is designed for the information of readers only and readers should not act on any of the information contained in this article without seeking professional advice. Nothing in this article constitutes advice, nor does the transmission, downloading or sending of any information or the Material create any contractual relationship. Links to third party websites are provided as a convenience to the reader, Paul Marks Ltd does not control and is not responsible for any of those websites or their content. Paul Marks Ltd accepts no liability or responsibility whatsoever for any loss or damage suffered by any user of the information contained on or accessed through this article or the Material downloaded.