Help with empty homes

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3. HM Revenue & Customs: Reduced rate VAT

Two year discount

This discount applies if you are bringing an empty dwelling back into use if:

  • it has been empty for two years prior to you starting work
  • it will be used for residential purposes after the completion of the renovations
  • you are using builders to complete the work

If these apply you may be eligible for a reduced rate of VAT (currently 5%) on the works of repair maintenance, or improvement.

The detailed requirements and eligibility for this concession can be found in HMRC Notice 708. You will need to make sure that your builders understand the reduced VAT rate rules so that they invoice you correctly. You will need to ask your empty homes officer to provide a letter confirming the date that the property became unoccupied.

www.hmrc.gov.uk search for HMRC Notice 708

Ten year discount

This discount applies if you are bringing an empty dwelling back into use if:

  • it has been empty for more than ten years prior to you starting work
  • it will be used for residential purposes by you, or your family after completion
  • you are using builders to complete the work (eligible for zero rated VAT)

This concession is included within the scheme for conversions by DIY house builders. The detailed requirements and eligibility can be found in HMRC notice 431C.

If you are completing the building work yourself, you don’t qualify for a reduced VAT rate. The recommended approach to achieving a 0% VAT rate (if you are eligible) is to first ensure that your builder applies the 5% VAT rate to the works under the two year rule, and then you complete the Conversion Claim Form in HMRC Notice 431C to recover the 5% VAT you have paid, plus any other VAT you have incurred on qualifying expenditure.

You will need to ask your empty homes officer to provide a letter confirming the date that the property became unoccupied.

www.hmrc.gov.uk search for HMRC Notice 431C

If you need more information about reduced rate VAT, please talk to an accountant, or to the HMRC.