Guest Blog: How VAT Savings Can Cover Your Architect’s Fees
“Landmark PT are essentially a tax consultancy and our clients are usually amazed at how easily they could have paid too much VAT if they had not sought specialist advice.” John Dyer-Grimes
Since I set up my business, Landmark PT, I have been asked to review thousands of building projects and have identified VAT savings of many millions of pounds. These savings, whether expected or not, are always a welcome benefit to the owners of property being developed – whatever the overall budget.
How do I do this? I’m a VAT consultant focusing on construction projects and property transactions. My original training was as a quantity surveyor and as a result of investigating the VAT rules in the 1990s and a subsequent dissertation on the topic as part of my quantity surveying degree course I discovered the joys of VAT on building works.
The process of researching for my degree dissertation led to the realisation that there were a large number of VAT related court decisions in relation to construction projects often with large sums of money at stake. Reading these cases for the first time back in the mid-1990s turned out to be what has become a lifelong quest – even today I sadly still enjoy reading the latest court decisions for the first time.
The first time I was able to put this knowledge into practice when working as a QS I saved a client £30,000 and found my role in the world! I have never looked back since.
In 2002 realising that my passion was somewhat unique I decided to establish my own business advising property owners carrying out construction works – since then the phone has not stopped ringing.
Projects come in all shapes and sizes and locations from reconstructed oast houses in Kent, listed apartments in Edinburgh to embassies being converted to private residences – including clients of Dyer Grimes Architects. My experience as a quantity surveyor gave me a good appreciation of construction technology, project contractual matters and procurement issues.
As successful VAT advice is so often related to establishing the facts of a situation this background knowledge has proved helpful in quickly understanding a construction project and then establishing whether there are VAT saving opportunities.
Although the well-known zero rating rules for alterations to certain listed buildings have been removed there are still many opportunities for saving VAT either at source, by reclaiming the VAT, or via special grant schemes. Broadly there are opportunities in the following areas to ask a contractor to charge you VAT at the zero or reduced 5% rate on qualifying works:
• New build dwellings – this includes not only pure new builds but situations where there are retained facades (single or double depending on circumstances) and even in situations where parts of the any pre-existing building survives, e.g. party walls, etc.
• Renovated dwellings that have not been lived in in the last two years.
• Converted buildings where the number of dwellings in that building have changed in number (up or down) including a commercial building (such as an office or barn) being converted into a dwelling.
• Installation of certain energy saving materials (although the EC has challenged the legality of these rules in the UK).
• Certain adaptations for disabled persons.
• Some businesses can register for VAT which gives further scope for VAT recovery on other costs, e.g .works to commercial buildings, professional fees and other project costs.
• There are grant schemes that refund a value equivalent to the VAT paid over – this related to listed places of worship and memorials.
• There is also a special scheme for self builders which allows them to reclaim VAT direct from HMRC in some cases.
All these VAT saving opportunities are subject to detailed rules which are often misunderstood hence the high volume of case law in this area. If one condition is not met then the VAT reliefs cannot apply making it critical to get the right answer. It is also worth bearing in mind that even if a project qualifies for VAT savings, some items will be excluded from the lower VAT rates.
For example, I worked with DGA on their award winning Emperor’s Gate project, a hugely ambitious development in the heart of Kensington that converted three mansion flats into one triple storey home. You can imagine how much a VAT bill of 20% would have added to a project of this scale, so knocking the VAT on construction costs down to 5% on qualifying works and allowed the clients and DGA to push the quality of the design even further.
Typically on a residential project we might be involved in:
• Reviewing the planning position.
• Looking at the contractual and procurement position, advising contractors where they can charge at 0% and 5% and providing supporting evidence.
• Apportioning building costs between the different VAT rates (areas such as fitted furniture and audio visual systems can require careful review to identify the full extent of any VAT savings).
• Dealing with questions from other advisors and, of course, dealing HMRC.
We have also on occasion taken HMRC to court where we cannot resolve the matter any other way.
If you have one of the build types mentioned above, the potential savings can cover the costs of my services ten or twenty times over, not to mention your architect fees. My partnership with DGA means that many of their clients can cover the costs of their architect fees through VAT savings, so that they can afford to design the home of their dreams.
To learn more about the work I do or if you have any questions about current or upcoming projects, email me at [email protected] or call 0208 878 5476 today.