Reduced rate VAT on renovation via Ltd?

[Rafd]

I've bought a house which is in need of renovation and qualifies for the reduced 5% VAT rate on works/materials due to being empty for over 2 years. I have read the relevant HMRC pages and it only seems to work if hiring a VAT registered building company to do the work. The building contractor bills you the reduced rate on work and materials then I guess claims back the materials VAT from HMRC.

However, the builder I was planning on using is non VAT registered so it would seem I would lose out on the VAT reduction on materials. I am wondering if there is an alternative way to buy materials via my own Ltd. My Ltd becomes the supplier but does not actually make or lose any money in the process. Does that sound in any way viable or am I clutching at straws? Are there issues with running multiple types of business through the same company?

Thanks!

[WTFH]

No. Either use a builder who is VAT registered, and benefit from the reduced VAT rate, or stick with your chosen builder and miss out.
Your accountant will advise you on it.

As an aside, builders get good rates on buying supplies by building up relationships with their suppliers. If you set up your own company and approach the suppliers, they will give you standard prices.

[Lance]

Which is the greater cost, time or materials?
If time then stick with a no-VAT builder.

You could pay his materials and claim back the VAT, but I'd check with your accountant as it's not your main business so you might not be able to claim the VAT relief anyway.

Out of interest how much paperwork and other hurdles are there to claim that relief? It might just not be worth it at all.

EDIT: Why not become personally VAT registered yourself? Become a self-employed property developer. Leave the LTD out of it. (ask your accountant for details).

[Rafd]

Thanks for the replies,

WTFH
any reasons for the no?

Lance
If using a VAT registered builder I would get the reduction on work AND materials so would be paying 5% on each. With a non VAT builder I would pay 0% on time and 20% on materials. I think the former option would be cheaper with any reasonable estimate of the time/materials ratio.

Regarding paper work I don't think it is too bad, we will be spending around £40k in total on the work so the VAT saving on materials could be several thousand.

Setting up as a self employed developer would probably be too much paper work though..

[WTFH]

WTFH
any reasons for the no?

Yes, you've provided it yourself:

If using a VAT registered builder I would get the reduction on work AND materials so would be paying 5% on each. With a non VAT builder I would pay 0% on time and 20% on materials. I think the former option would be cheaper with any reasonable estimate of the time/materials ratio.

The easiest way to work it out is to do due diligence.
Get more than one quote. Make sure one is from a VAT registered builder, and that you can get them to quote based on it being a 5% job.
Then compare the figures, making sure they are like-for-like quotes.

[Rafd]

To be clear.. the two options I listed are the ones currently available to me, however I am asking about a 3rd option. Paying a non VAT builder and buying materials through my Ltd at 5% VAT. This option is clearly the best if it can be made to work. Also importantly I have a highly recommended and trustworthy non VAT builder who I would prefer to use.

[WTFH]

To be clear.. the two options I listed are the ones currently available to me, however I am asking about a 3rd option. Paying a non VAT builder and buying materials through my Ltd at 5% VAT. This option is clearly the best if it can be made to work. Also importantly I have a highly recommended and trustworthy non VAT builder who I would prefer to use.

If you've already decided that's how you're going to do it, then all you're looking for is permission/support from us, not advice.
Have you actually had quotes from other builders where they have done it at 5%, or not?

OK, if you want to do it yourself then discuss it with your accountant. Then work out the amount of time you will spend sourcing and buying the materials. Then read up on the 5% rule.

[Maslins]

If you've already decided that's how you're going to do it, then all you're looking for is permission/support from us, not advice.

This.

FWIW my view is also "don't do it".

[Rafd]

No I'm not looking for permission or support, I'm just trying to get some advice on whether a possible option is viable or not. Ideally looking for advice backed up with facts rather than opinions.

[northernladuk]

The renovation is via the LTD but you said you bought the house... I assume this is you as a business and not you as an individual?