Re VAT - those renovating, refurbishing or extending an existing dwelling are not able to take advantage of the VAT Notice 431 scheme. They do, therefore, have to pay out VAT at the full rate on any contracts, supply and fix, labour only or materials only, and this is not recoverable.
However, if the dwelling has been left unoccupied for more than ten years, it is treated as a conversion and VAT is recoverable under the scheme. If a dwelling has been empty for more than two years then, although its still not eligible under the scheme, there are rules in place that ease the VAT burden. In these cases, a VAT-registered builder or subcontractor can obtain permission from the HMRC to charge a reduced rate of 5% on their work.
A private individual purchasing their own materials would not have the ability to recover any VAT paid out and, therefore, in these circumstances it is often advisable to let the registered contractor purchase the materials and include them in their contract.
