VAT Implications of Barn Conversions

Landscape shot of Shropshire barn building on cloudy day

In recent years many farmers have sought planning permission on redundant farm buildings to convert them into dwellings.

If a farmer is looking to develop the barn himself, rather than sell it on once permission has been granted, one of the key considerations is the ability to reclaim VAT on the development costs.  This is a highly complex area, and one that needs to be considered carefully on a case-by-case basis.

Whether or not VAT can be reclaimed, and indeed at what rate, will depend on the intended use of the building.  The rates and amounts can vary, subject to different rules, depending on who is to occupy the building, whether that be a family member or an agricultural worker, for example.

If the barn is to be used as holiday accommodation, VAT can be fully recovered on development costs with the condition that VAT is then charged and repaid to HMRC on income from the letting.

We can offer expert advice on the tax implications of barn conversions. To speak to one of our team, please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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