Conversion into Dwellings Means More Dwellings!

The right to reclaim VAT on residential conversion works was further clarified by a case brought in the Court of Appeal recently. The argument involved the conversion of a residential school building which produced a private residence plus a further three flats. A claim to recover VAT in excess of £300,000 relating to the conversion of the non-residential parts of the building was made. It was rejected by HM Revenue and Customs on the grounds that there had been a residence there before, so the work was not the conversion of a non-residential property.

In the Court’s view, the appropriate test to apply was ‘Are there more dwellings after the conversion work that there were before?’ If there are more, then the VAT is recoverable. If not, it is not.