Readers' forum: Residential renovation

We act for a company that owns a residential property that has been empty for some 12 years. However within the grounds of the property there is an annexe that has been occupied by a security guard on an informal tenancy agreement for no rent for about ten years. The agreement is that he guards the property against vandals and squatters.

The annexe is furnished but the main house is not. Our clients are now in the process of signing contracts with a construction company to renovate the main house with a view of letting it out once the works are complete. VAT Notice 708: Buildings and construction at paragraph 8.3.3 states that one can ignore occupation by ‘guardians’ for reduced rate purposes.

Can Taxation readers confirm that in this case the reduced rate of 5% VAT will apply on the qualifying expenditure. Just to clarify matters further the annexe is not...