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Empty Properties and VAT Discounts

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According to the pressure group, Empty Homes , there were more than 635,000 empty homes in England during 2013. An empty home is little good to anyone and a waste of an essential resource. It is no surprise, therefore, that the government is committed to reducing the number of unoccupied residential properties.

One way in which owners of empty property are being encouraged to renovate and convert the dwellings into habitable homes, is to grant VAT discounts on the work involved.

Empty houses and the VAT discounts that are available for their renovation make them a potentially attractive proposition for buy to let landlords:

  • the large number of empty homes around the country is a reasonably reliable estimate, since the data is supplied by local authorities who typically offer exemptions on the payment of council tax for such housing - thus giving owners an incentive for declaring their property as empty;
  • if you are buying an empty property with its renovation or conversion in mind, it is important to remember that whilst the works are in progress you may need to protect your investment with unoccupied property insurance - a product in which those of us here at UKinsurancenet are specialists;
  • the normal rate of VAT on building works, or charges by tradesmen such as plasterers, carpenters and electricians, is 20%;
  • if you are employing builders for the renovation or alteration of an empty property, or converting a non-residential building into a home or flats, there are, in some cases, discounts available that reduce the rate of VAT to just 5%;
  • the tradesmen may not be aware of the discounts that apply in your case, so you need to remind them before they make out their invoices to you;
  • if you have completed the renovation or refurbishment of the dwelling you may also qualify for VAT discounts on the installation of energy-saving material, grant funded heating systems and certain security alarm systems;
  • if you or any of the tenants who are living in an existing dwelling are in need of disability aids to move about your home, the work of installing such aids may qualify not just for a reduction to 5% of the standard rate of VAT, but exemption from the tax entirely;
  • similarly zero rated for VAT purposes is the work required for any first-time gas or electricity supplies to a dwelling.

The value of these discounts and exemptions clearly depends on the extent and cost of the works you have contracted. In many cases, the discounts may represent a considerable saving over the cost of other kinds of building works and may give prospective landlords that extra degree of incentive for acquiring an empty property in order to return it to the usable housing stock.

The detailed rules on qualification for VAT discounts can sometimes be quite complicated, so you may want to sort out exactly where you stand in relation to such matters before you proceed with the planned works.