If I’m registered for VAT a a sole trader can I claim back VAT on unrelated purchases?

Forum Categories GENERAL VAT DISCUSSIONS If I’m registered for VAT a a sole trader can I claim back VAT on unrelated purchases?

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    I am registered for VAT as a sole trader for my consultation business.

    I’m just buying a new property and going to build a garden room chalet/office in the back garden. I’ll use it as an office for some of the time, but also hope to let it using Airbnb or similar.  Can I claim back VAT on the purchase and build if its not solely for the use of my business?

    Any replies would be really useful. Thanks in advance!

    Trevor S


    There isn’t a straight-forward answer – but hope this helps!

    First point to consider is whether you are/will be the sole owner of this property. This will determine whether the property is potentially considered to be part of your existing sole-trader VAT registration or not. If you are not the sole owner, the property will not be covered by your existing VAT registration, so you cannot reclaim any VAT on the works through it. Although if the income generated from it is significant, you may need to consider whether you and the other owner(s) are required to register for VAT jointly.

    If you are the sole owner and will be putting it to some business use, the property is likely to be considered part of your business. The contractor will charge you VAT which you can claim to the extent that you are putting it to taxable business use. HMRC guidance on the need for apportionment between business and private use is here: https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit25000.

    Bear in mind that the lettings would also be an activity of your business. Some lettings (e.g. holiday lets or similar) are subject to VAT, which would make you liable to account for VAT on that income – whilst other lettings are VAT exempt. HMRC’s notices 709/3 (holiday accommodation) and 742 (land and property) should help in determining the VAT treatment of the letting income. If the income is subject to VAT, you can include the letting as taxable business use when calculating the proportion of VAT that you can reclaim on costs. If the letting income is exempt, you can only reclaim VAT on the proportion relating to lettings if the value falls below the partial exemption limit (£7.5k per year, but see HMRC’s notice 706 for more details).

    In any event, no VAT would be recoverable in respect of your own private use of the property.

    It may be worth seeking further advice based on the specific details once they are known, but hopefully this gives you an initial idea of what may be possible.


    Thanks so much Trevor, I knew it wouldn’t be straight-forward!  There is lots of food for thought there.  Great to have the basic facts to research more thoroughly.

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