Introduction to this document

VAT reduced rate evidence log

Where you provide construction services relating to buildings, you may be able to charge the 5% reduced VAT rate if you can prove the property meets the necessary conditions.

Reduced rate

The reduced VAT rate applies to various types of work on residential accommodation including renovation of a property that’s been empty for at least two years. However, there are exceptions which allow you to charge the lower rate even where the property hasn’t been vacant for some or all of that time.

Selling a business

The question of whether a property has been empty is a question of fact. However, some types of occupation are ignored for these purposes:

  • illegal occupation by squatters
  • non-residential use, such as using the property for storage, commercial or otherwise
  • occupation by a guardian for the purpose of preventing the property being occupied by squatters or vandalised.

If the customer you are undertaking the work for has moved into the property already when you start the renovation work, you might still be able to apply the 5% rate if:

  • the property hadn’t been lived in during the two years prior to when the person(s) living in it acquired it
  • no renovation work was carried out in the two years before the occupier acquired the property. Minor works needed to keep it dry and secure can be ignored
  • your building services are supplied to the occupier within a year of them acquiring the property.

Evidence

HMRC might query your application of the 5% rate, so it is a good idea to build up a file of evidence that helped you reach your decision. Evidence could include confirmation from the local authority, correspondence with the owner, or landlord, etc. Use our VAT Reduced Rate Evidence Log to keep the information to hand if HMRC asks questions.