I am the director of a new company for building services. We have secured a house of multiple occupation conversion contract, including an extension, to build six bedrooms with en-suites. Will the building work (extension) and conversion work both charge 5% VAT? 

Arthur replies: 

The zero-VAT rate would apply if you are converting a currently non-residential property into a residential property. See HMRC Buildings and Construction VAT notice 708, section 5. If it has previously been residential but has been empty for two or more years, the 5% VAT rate would apply. See section 8. Alternatively, see the rules and conditions in section 7 because you may qualify for the 5% VAT rate by virtue of 'Conversions into single household dwellings'. This is as far as the conversion part is concerned. But as far as the extension part is concerned, see section 3.2.5. If it is self-contained (no internal access between the units) and built on top or next to the existing building, it can be zero-rated. There are a number of nuances here, and you will have to read sections 3 and 14 carefully to see which category your building falls into.