Should we register for VAT to reclaim input tax on the costs of conversion?

My brother owns a commercial business unit, and we have decided to convert it into residential units. Although I will be project managing the conversion, I will not be charging my brother. As you can imagine, there will be a lot of expenditure on building materials, which are subject to VAT and potentially contractors who are VAT registered. Will it be advantageous to set up a VAT-registered business for the development so that we can claim back the VAT incurred?

Broadly, where an individual converts non-residential property into residential property they can zero rate the sale of the completed residential units. Where this is the case, it will be worthwhile registering for VAT as much of the input VAT incurred can be reclaimed. However, there are many rules and conditions that can apply in such circumstances. VAT Notice 708: buildings and construction should provide a useful reference tool. I would recommend that you read it in detail as it will help you satisfy yourself as to the correct liability of the supplies of goods and services being made by suppliers and contractors to you. The Notice can be found on the GOV.UK website at here.

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