5% Vat for unlived in properties and construction work. anyone clarify?

[unwashed potato!]

got a customer who is sure cleaning falls under construction work and should only be charged 5% on the work as the house has been empty and unlived for more than 2 years.

looking on hmrc site it seem lists to me quite specifically that the renovation work is 5%, but carpet fitting etc is 20%, and i'd put builders cleaning closer to carpet fitting than i would renovation.

i've asked for proof but don't get it other than "i'm sure it's 5%".

to save me a 1 hour wait with hmrc on the phone, does anyone know what services qualify for the 5%?

 

[Derek W]

8.4 Reduced rate services​

The installation of building materials are reduce rated (read paragraph 13.8 for examples of building materials). You can also reduce rate any works of repair, maintenance (such as redecoration), or improvement (such as the construction of an extension or the installation of double glazing) carried out to the fabric of the dwelling during the renovation of the empty property.


You can also reduce rate works within the immediate site of the dwelling that are in connection with the:

• means of providing water, power, heat or access
• means of providing drainage or security
• provision of means of waste disposal

All other services are standard-rated. For example, you must standard rate:

• the installation of goods that are not building materials, such as carpets or fitted bedroom furniture
• the erection and dismantling of scaffolding
• the hire of goods
• landscaping
• the provision of professional services, such as those provided by architects, surveyors, consultants and supervisors

Buildings and construction (VAT Notice 708)

How to work out the VAT on building work and materials if you're a contractor, subcontractor or developer.

www.gov.uk

 

[unwashed potato!]

8.4 Reduced rate services​

The installation of building materials are reduce rated (read paragraph 13.8 for examples of building materials). You can also reduce rate any works of repair, maintenance (such as redecoration), or improvement (such as the construction of an extension or the installation of double glazing) carried out to the fabric of the dwelling during the renovation of the empty property.


You can also reduce rate works within the immediate site of the dwelling that are in connection with the:

• means of providing water, power, heat or access
• means of providing drainage or security
• provision of means of waste disposal

All other services are standard-rated. For example, you must standard rate:

• the installation of goods that are not building materials, such as carpets or fitted bedroom furniture
• the erection and dismantling of scaffolding
• the hire of goods
• landscaping
• the provision of professional services, such as those provided by architects, surveyors, consultants and supervisors

Buildings and construction (VAT Notice 708)

How to work out the VAT on building work and materials if you're a contractor, subcontractor or developer.

www.gov.uk

Thanks but that's what I've seen and it doesn't specify either way to satisfy either party.

 

[Rroff]

Seems a really vague one that you probably won't get an answer to without talking to HMRC as it seems to hinge on how essential the work is for making a property not lived in for 2+ years habitable i.e. if there was faecal matter spread up the walls or something then cleaning it would probably be essential and applicable under the reduced rate, whereas a general cleaning would probably come under standard rate.

 

[Participant]

Is it cleaning up after the installation of building materials, or going in just to clean?

You're going to want to get it from HMRC anyway to cover yourself.

 

[shroomz]

To me, the cleaning is a service I'd put in the same bucket as the architect or a landscaper so I wouldn't even have considered it. It's not essential building fabric or construction labour. They even don't count carpets as bare essentials that qualify for reduced rate. Like a couple of others said you'll be on the hook for it in the end so I'd be looking for a lot more convincing than "I'm sure it does".

 

[Cold Fusion]

You may wish to visit here, section 3.3.4 and 3.3.6 both mention builders clean but you will need to read the whole document to ascertain the context.

Buildings and construction (VAT Notice 708)

How to work out the VAT on building work and materials if you're a contractor, subcontractor or developer.

www.gov.uk

Otherwose might be worth ringing or email HMRC to dpuble check

 

[Rroff]

You may wish to visit here, section 3.3.4 and 3.3.6 both mention builders clean but you will need to read the whole document to ascertain the context.

Buildings and construction (VAT Notice 708)

How to work out the VAT on building work and materials if you're a contractor, subcontractor or developer.

www.gov.uk

Otherwose might be worth ringing or email HMRC to dpuble check

3.x.x are for construction of a new property, I don't believe they apply to renovations of a building unused residentially 2+ years.

The only time cleaning services, under maintenance, might apply for the lower rate is when they are essential work on the "fabric" of the building needed to make it habitable and/or to enable building work and even then it is so vague you'd have to check with HMRC. That wouldn't include general cleaning services after redecoration or after core building work, etc.

 

[PlacidCasual]

It might be argued that cleaning for safety as part of building works is essential.

 

[dcsarge]

It might be argued that cleaning for safety as part of building works is essential.

Conversely, I would expect such cleanup to be part of the routine of the builders and not charged as separate element. It would surely fall under HSE regs for a safe working environment.

 

[PlacidCasual]

Conversely, I would expect such cleanup to be part of the routine of the builders and not charged as separate element. It would surely fall under HSE regs for a safe working environment.

That's a contracting matter. I routinely work on CDM projects with multiple contractors where each party is expected to clean their own work area but specialist cleaners are still required. One assumes there will be instances where this may be true in building work from time to time.

 

[Freakbro]

got a customer who is sure cleaning falls under construction work and should only be charged 5% on the work as the house has been empty and unlived for more than 2 years.

looking on hmrc site it seem lists to me quite specifically that the renovation work is 5%, but carpet fitting etc is 20%, and i'd put builders cleaning closer to carpet fitting than i would renovation.

i've asked for proof but don't get it other than "i'm sure it's 5%".

to save me a 1 hour wait with hmrc on the phone, does anyone know what services qualify for the 5%?

Nuke it from orbit Ring the HMRC.....it's the only way to be sure.

I was going to stick my neck out and say "LOL No", but having worked with VAT for years and after having dabbled in this area for a client of mine, I know how opaque the finer details can be. (And to be fair, the VAT office don't always understand the rules, as they can be quite contradictory. As a successful appeal of mine showed a few years ago)

Here's a section of HMRC rules for DIY builds, not that it's relevant here, but it shows it's maybe possible

Goods and services you can claim for under the VAT DIY Scheme

Find out which items you can or cannot claim a VAT refund for under the DIY Housebuilders' Scheme.

www.gov.uk

Cleaning of building

Builders clean services after all the work is undertaken except the decorating. The cleaning services should be charged at the zero or reduced rate depending on the type of construction.

 

[dcsarge]

That's a contracting matter. I routinely work on CDM projects with multiple contractors where each party is expected to clean their own work area but specialist cleaners are still required. One assumes there will be instances where this may be true in building work from time to time.

I hadn't considered that, does put things into a grey area.

 

[markmorales]

3.x.x are for construction of a new property, I don't believe they apply to renovations of a building unused residentially 2+ years.

The only time cleaning services, under maintenance, might apply for the lower rate is when they are essential work on the "fabric" of the building needed to make it habitable and/or to enable building work and even then it is so vague you'd have to check with HMRC. That wouldn't include general cleaning services after redecoration or after core building work, etc.

hello....The 3.x.x rules are for building new properties, not for fixing up old ones that have not been lived in for a while. Cleaning only gets a lower VAT rate if it is needed to make the building livable or help with other construction. Regular cleaning after painting or big repairs does not count. If you are not sure, it’s a good idea to ask HMRC to be sure!!!

 

[unwashed potato!]

While I've got this thread I have another question.

I have another building firm that has booked us. CIS will apply to this invoice.

We've always had it with invoices that we have our charges, plus vat, and then the customer doesn't pay the vat to us but instead pays that for us to government and we claim it back through paye with cis suffered.

This new firm wants to do it differently. They want to not only not pay the vat, but also then take cis off at 20%.

So our bill is say £1000 plus vat. They normally would pay us £1000 and £200 to vat man, but this firm wants to pay us £833.33 and we have to now claim the £200 vat and the £177.

Doesn't make sense to me as the idea of cis was to stop firms from not paying the vat to the government, but this goes beyond that.