There is an update to this post at … VAT for barn convertors update December 2007
Having been confused by the VAT treatment around barn conversions for some time, I thought I’d better get the situation clear before going any further. This is a summary of the VAT situation currently:
Conversion of a building to a residence is free of VAT paid on labour and materials.
You can reclaim the VAT paid on labour and materials without having to be VAT registered.
The relevant legislation is ‘Customs & Excise Notice 719 – VAT Refunds for DIY Home Builders and Converters‘.
A VAT registered builder should invoice you for their labour and any materials they purchase at the reduced VAT rate of 5%. This along with the full rate VAT paid on materials you have purchased can be reclaimed from your local Customs & Excise VAT office once the project has been completed. You’ll need all appropriate receipts to make the claim.