Where money is being spent on recladding works, it may be possible for this to be at the reduced VAT rate for existing blocks of flats that are being rented out as investments.

There is a 5% VAT rate for the addition of energy saving materials to existing residential dwellings and this includes adding insulation to walls. Whether replacement cladding qualifies as insulation for walls will depend upon its purpose. Cladding may be fixed to a building for various reasons, which could include:

• Complying with building regulations
• Protecting against the elements
• Reducing noise

However, it can only benefit from the reduced rate for energy saving materials if its dominant purpose is to improve the thermal efficiency of the building. While cladding may have the ancillary benefit of improving thermal efficiency (because it is an additional wall covering), that is not sufficient for it to qualify for the reduced rate of VAT.

If you know of any projects where there is recladding needed for residential buildings, we can discuss this further with you. We can also advise on queries concerning flats (either new build or conversions) that were sold, as opposed to existing blocks that are rented out.

In addition, there could be a saving if you have flats (either new build or conversions) that were newly constructed or converted: the zero or reduced VAT rating may be applicable for replacement cladding under different rules.

For more information, please get in touch with Simon Levine or use our enquiry form.