There are VAT savings to be made by a property owner!

When a builder converts, for example, an office into flats, his services will be subject to 5% VAT. This reduced rate of VAT also extends to any materials he provides as part of his work.

The professional fees charged by architects and surveyors will always be charged at 20% VAT.

However, if the 5% VAT rate applies to the building work, some VAT planning could be undertaken.

The professionals could provide their services to the builder. If he is VAT registered, he can recover the 20% VAT input tax.

If the builder’s contract with the property owner is for a ‘design and build’ service, the builder will charge 5% VAT on his entire fee, including the materials and the professional fees. This will produce a huge VAT saving for the property developer.

Architectural or design services, supplied as part of a ‘design and build’ residential conversion contract can be treated as part of the 5% VAT rated supply of construction services.