VAT Savings Now Available on Roof Space Conversion
The VAT and Duties Tribunal have upheld a developer's claim that the sale of new self-contained flats created by the conversion of empty roof space in an existing block of flats should be treated as zero-rated rather than exempt.
Neither treatment required VAT to be charged on the sale price but the decision on zero-rating confirmed that the developer was entitled to reclaim VAT paid on the conversion costs.
On the basis that the roof space was not currently used as a dwelling and that the tenants of the existing units had no access to it, the Tribunal decided that the conversion fell within the concessionary arrangements relating to conversion of "non-residential" parts of a building (originally introduced as part of the plan for regeneration of town centres by encouraging conversion of redundant business space into living accommodation).
The decision opens the way for VAT registered developers both to achieve significant cost savings on any similar projects in future & also to review the position on any VAT previously blocked by HMRC in relation to existing developments.
(Merlewood Estates Ltd v HMRC [2008] UKVAT V20810 - released on 22 September 2008 - & see Item 1(b), Group 5, Schedule 8, Value Added Tax Act 1994)
For further details please contact a member of the team on 01392 666777