In our regular Q&A series, Paul Knott, VAT adviser at Croner Taxwise considers the VAT exemption rules when converting a commercial building to alternative use
My client is a partnership buying a disused farm building from the owner who has opted to tax it. The client is then converting it into a children’s day nursery. They will occupy the building and run the nursery themselves. Are supplies by a nursery VAT exempt, and can they reclaim any of the input tax on the purchase of, and/or the works to, the building? The purchase price will be £250,000 and the conversion will be roughly the same amount again.
The construction work itself will not benefit from the reduced rate for conversion work as the property is not being converted from non-residential use to residential use (VAT Notice 708 section 7 refers). VAT will therefore be due on the building works at the standard rate.
