I met the engineer on site who fairly quickly updated the original quote to just over £4,000 (how much!?) which I forwarded to Virgin Works Dept in Strathclyde, all to allow the Contractor to plan and coordinate the work.
A couple of days later I was dismayed to hear from the Contractor that the cheque was being returned because I had not added 20% VAT.
Contacted Virgin and explained that the development is new build dwellings, so no VAT is payable since the work is enabling new construction; no VAT was due on the BT Pole relocation or the gas disconnection. Initial response is that Virgin charge VAT on all their work and therefore I should claim it back from HMRC. Phone HMRC and after multiple auto phone options, and an excruciatingly long wait spoke to a most unhelpful jobsworth who says that if the VAT was incorrectly charged in the first place then I could not reclaim it back as part of a self build.
Phone Virgin back who by this time have discussed matters with their accountants and spotted a WORKSHOP on the ground floor in which case the VAT Guide 708 confirms that VAT can be charged on the project. I am beginning to panic does this mean that I will also have to pay VAT on the whole development?!! This would mean an extra £50,000 on top of the £11,000 for the Workshop portion that my accountant has previously advised I am liable.
I phone my accountant and nervously explain the situation and my concern, he will look into it and get back to me, probably after the weekend, I email him the Planning Permission. Phone Architect David and he asks me if I can afford the extra if required? I am so committed to the project at this stage, I have spent so much money already and the contractor is gearing up and expending money, the answer has to be yes but it is going to be very painful and I do not know where the money is coming from.
Thankfully receive a fast response by email from the accountant who attaches a new extract from HMRC 708 VAT Guide for Construction that contradicts the clauses referred to by Virgin and most importantly specifically covers Live-work development.
The decision to use the term Live-work to describe the main unit in the Planning Application was slightly accidental but now had significant importance. VAT would be apportioned to the commercial part of the development (as the accountants previous advice) unless the Planning Permission did not specify a minimum area for commercial use in which case no VAT is due on the whole development. GREAT NEWS!!
Forward details of the Clause covering Live-work VAT to Virgin, together with the Planning Permission and their accountants return confirmation by email that this is acceptable and their work will be zero rated.
WIth the above Clause I am fairly confident that the Contractor will also be able to VAT zero rate the workshop so I forward information for their accountant to consider.
By sickening contrast I have watched a share price of some investments recently sold to finance the project have now increased in value by almost exactly the same amount as the VAT that I may be saving. Still must look on the bright side at one point this week I thought I was £60,000 down!!
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