Converting Offices into Living Accommodation

We’re dedicated to responding to our clients’ enquiries to full effect, with a recent one being how to convert offices into living accommodation. We don’t mean which colour scheme to use and whether or not to include Wi-Fi in the rent, as we’re focusing on the tax side and how to prevent financial risk.

General Permitted Development Order

Back in 2015, an amendment to the General Permitted Development Order (GPDO) made the converting of commercial properties into homes much easier. Namely, it removed the need to gain planning permission if the conversion is under the Permitted Development Rights or remains within the same Use Class.

Knowing the Use Class is the first place to start and they can be found on the Planning Portal website.

Converting a commercial property into a home

Once you’ve checked the Use Class and if it’s a case of needing planning permission, you must apply for it before starting any physical work. Even small changes to a building’s structure or layout can result in expensive and time-consuming consequences, so always do it by the book from start to finish.

Why would I need planning permission?

Whilst some office conversion projects won’t need planning permission, some will warrant it in order to ensure that the end result is suitable for both the future tenants and the existing neighbours.

What kind of restrictions are there?

If the property is a listed building or located within a Conservation Area, planning permission probably won’t be given. The same applies if you’re based within an Area of Outstanding Natural Beauty, a Safety Hazard Area or a Military Explosives Area. Whilst some of these scenarios are unlikely, they’re certainly not impossible.

What are the VAT rules?

You’ll be used to paying 20% VAT on most purchases, which typically includes work carried out on an existing building. However, when a commercial property is being transformed into homes, you can usually enjoy a reduced VAT rate of just 5%.

This reduced rate applies to multiple costs, such as:

• Work done to walls, floors, roofs, stairs, doors, windows, plumbing and electrics
• The provision of power, heat, water and drainage systems
• The fitting of kitchen units and light fittings
• Any materials purchased by the builder or contractor on the property owner’s behalf, as well as labour costs

What doesn’t the VAT reduction cover?

Multiple items are unfortunately not treated to a lower VAT rate, including:

• Fees charged by architects, quantity surveyors and interior designers
• Any items that don’t qualify as building materials, such as fitted bathroom furniture and carpets
• The hiring of scaffolding

Is it worth it?

All in all, there are quite a few advantages that come with changing offices and other commercial units into homes:

• Commercial properties are built in convenient locations, such as near transportation hubs and retail centres, which is an attractive selling point
• There’s often a higher chance of finding a tenant when it’s a residential property, as many businesses are now focusing on remote working and e-commerce, which reduce the need for a physical base
• Your renovation project could play a role in breathing new life into an area that desperately needs it
• It can prove to be a highly lucrative move and a strong long-term investment

Need more advice?

If you’re considering changing commercial premises into residential properties, fill in our contact form and we’ll help you to make it a smooth and stress-free process.