Rates at a glance
| Work or supply | Rate |
|---|---|
| Converting a single household dwelling into a house in multiple occupation | 5% |
| Converting a building in another use, such as a shop or office, into an HMO | 5% |
| Building materials supplied and fitted by the contractor | 5% |
| Refurbishing or upgrading a property that is already an HMO | 20% |
| Furniture, carpets and appliances | 20% |
| Architects', surveyors' and consultants' fees | 20% |
The rate for your project depends on its facts. Each line of a quote is rated on its own.
Does yours qualify?
The headline tests. All of them have to hold.
- Before the work the property is a single household dwelling, such as a family house, or a building in some other use.
- The work converts it into one or more multiple occupancy dwellings, such as bedsits.
- The work is a conversion that changes what the building is, and is not just repair or redecoration.
Plus 2 further points we test. These are the ones that are easy to miss, and any one of them can change the answer. A qualification report works through every one against your documents.
About the qualification reportWhere projects go wrong
- A property that is already an HMO. Adding en suites, fire doors or an extra room to an existing HMO is not a conversion, and that work is 20% unless another relief applies.
- Furniture and white goods. Beds, desks, wardrobes, fridges and washing machines are all 20%, even on the same invoice as 5% work.
We check for 3 more pitfalls on every project of this kind. Most only come to light once the work has been invoiced, which is the expensive time to find them.
What it can be worth
A family house converted into a seven-room HMO
An investor buys a five-bedroom house that has been a family home and receives a quote of £165,000 before VAT to convert it into seven lettable rooms with a shared kitchen. The quote shows 20% on every line.
| Item | Net | Rate | VAT |
|---|---|---|---|
| Structural alterations and new partitions | £34,000 | 5% | £1,700 |
| Fire doors, fire alarm and emergency lighting | £19,000 | 5% | £950 |
| Seven en suite shower rooms | £42,000 | 5% | £2,100 |
| Plumbing, heating and rewiring | £31,000 | 5% | £1,550 |
| Shared kitchen units and worktops | £12,000 | 5% | £600 |
| Plastering and decoration | £11,000 | 5% | £550 |
| Beds, desks and wardrobes | £7,000 | 20% | £1,400 |
| Kitchen and laundry appliances | £6,000 | 20% | £1,200 |
| Carpets | £3,000 | 20% | £600 |
| Total | £165,000 | £10,650 |
- VAT if quoted at 20% throughout
- £33,000
- VAT rated line by line
- £10,650
- Difference
- £22,350
An example to show how the rates fall across a typical HMO conversion. It is not a figure for your project.
How we help with HMO conversions
We establish whether your project is a conversion into an HMO for VAT or belongs under a different route, and whether it meets the tests for the reduced rate. You get a clear answer on whether it qualifies, with the reasoning written down for your builder and your accountant. If the work is correctly 20%, we say so before you commit to a price.
A line-by-line analysis then gives you the right rate for every part of the quote, with a letter for your builder. It is best done before the contract is signed. The other kinds of conversion are covered on the conversions page. To start, send us your quote.
Questions
What is the VAT on converting a house into an HMO?
It is 5% where the work converts a single household dwelling, or a building in another use, into multiple occupancy accommodation and the conditions are met. The rate covers the contractor's labour and the building materials they supply and fit. Furniture, carpets and appliances are 20%.
Does the 5% VAT rate apply to work on an existing HMO?
Normally not. The reduced rate is for converting premises into an HMO. Refurbishing or upgrading a building that is already one is not a conversion, and the work is 20% unless a different relief applies.
Does the property have to be empty for two years to get 5% on an HMO conversion?
No. The two-year rule belongs to a separate relief for renovating empty homes. An HMO conversion qualifies because of the change in the kind of accommodation, whether or not the house was lived in beforehand.
Based on the Value Added Tax Act 1994 and HMRC's published guidance. This page explains how the rules work in general. It is not advice on your project, and no rate applies until the facts have been analysed.
