Is our knock-down and rebuild project free from VAT?

We had a house fire in 2018 which has severely damaged our bungalow, leaving just the floor slabs and external walls. We are considering accepting a cash settlement from our insurance company to rebuild the property. We’d like to create a dormer style bungalow with two large bedrooms, a study and a family bathroom upstairs.

It is worth mentioning that the bungalow was flooded five years ago because it sits too low. To avoid future floods, we plan to raise the ground floor level by 200mm.

We were wondering if we could keep the original floor slab and put a raised raft over it to form a higher ground level. We would then build a timber frame property on it.

This would be to avoid removing and reinstating the foundations. Could we build this Vat-free?

You can reuse the original floor slab and still reclaim your VAT as a new build under VAT Notice 431. In certain circumstances, an external wall (sometimes two) can also be retained, but this would be dictated by the planning approval.

In this case, I suggest demolishing all of the old structure and starting afresh. Raising the slab sounds complex and the practicality of what you are proposing very much depends on the condition of the existing foundations and if they can be incorporated into the new design effectively.

It’s a question for a structural engineer specialising in foundation design, but I suspect that the price of designing and adapting would match or exceed the cost of grubbing up the old foundations and starting again. So I’d opt for the latter.