Personal finance: How to slash renovation costs
Be VAT savvy
Make sure your builder is aware of the VAT rules at the beginning as this will save time and money in the long run. While it may seem cheaper to source materials yourself, remember you’ll pay 20 per cent on them. If the materials are provided by your builder, 0 or 5 per cent VAT could apply.
Pin costs down early
VAT incurred by individuals may be recoverable under the VAT DIY scheme. This applies where the costs relate to a new building, or the renovation of a property that has not been used as a dwelling for ten years. It’s worth getting the VAT position confirmed at the planning stage as any savings could be used to cover unexpected costs.
Compare, compare, compare
Compare at least three contractors on the basis of their ability to do the job you want, references (and make sure you have taken them up), word of mouth, professional licences and trade association memberships (check these too) as well as your gut feel for how professional an outfit you are dealing with, and finally, the price of the job. As mentioned already, question your contractor on the VAT position and incorporate savings into your budgets.
Consider Design and Build
There are VAT benefits to having a single contractor. You can still choose your architect, however if they are engaged by the main contractor the 0 to 5 per cent VAT rate will apply to their services too. These arrangements are often beneficial for new build, some conversions (eg: stables to a house, or house to flats) and renovations of properties that have not been used as dwellings for two years or more.
Consider the end use
Finally, is your renovation for business purposes? Perhaps you are converting a barn into an office, or constructing a garden office? In these cases some of the VAT could be recovered by the business (if registered) and there are up to 100 per cent tax allowances for this type of work. Taking tax advice at the planning stage could improve your financial position.
• Scott Craig is a partner at Scott-Moncrieff accountants and business advisers.