Money Helpdesk: Can I build my garage without paying duty?

I LIVE in a listed house and am planning to build a garage in the garden. I had to seek listed building consent for the garage. Improvements to the house were VAT-free. Does this mean my garage will also be VAT-free, or will that be subject to the 20 per cent charge?

DS, Edinburgh

Susanne Simpson writes:

Generally speaking, any work done to an existing house attracts a VAT charge of 20 per cent. As you allude to, however, the VAT rate will be reduced where works are carried out to listed residential buildings.

Strict conditions apply in order for listed building works to be free of VAT. The work must be what is known as an "approved alteration"; that is, listed building consent is required and obtained before commencing any work. Work classed as repairs or maintenance will not qualify as an "alteration" for these purposes. For example, if a wall is knocked down in a listed residential building to extend an existing room this is an alteration (ie potentially no VAT). However, replacement of rotten wooden windows with UPVC double glazing would be considered repair and maintenance, and VAT would be due at 20 per cent.

I assume that the improvements carried out to your listed house qualified as "approved alterations", which is why the work was free of VAT.

Does the construction of the new garage attract a VAT charge of 20 per cent? This will depend on whether the garage is an extension of your house or a new stand-alone structure.

If the garage is built as a stand-alone structure in the garden of your property, as a new build, VAT at 20 per cent should be charged on its construction. However, if the garage is built as an extension to your listed house, its construction might qualify as an "approved alteration" and be VAT-free.

Ultimately, it is the builder's responsibility to determine the VAT to be charged on their services from details provided by the customer.