Building a granny annexe

If you extend your property to accommodate an elderly parent, does VAT apply or is the building work zero-rated?

This was a question posed by a client who wanted to build a “granny annexe” for his parents.


A farmer was extending and converting a garage attached to his farmhouse.

He was seeking to create a separate dwelling for his parents, who were still partners in the farming business.

The planning permission did not allow the “new” dwelling to be occupied or disposed of separately from the main farmhouse. This meant that for VAT purposes neither the zero rate for new houses nor the reduced rate for qualifying conversion works could apply.

Although the parents were still partners in the business, the actual business use of the new living accommodation was likely to be too limited to justify any claim for the VAT through the farm’s VAT returns.

The outcome

When I explored the situation in more detail it became clear that there was some opportunity for zero-rating, but not for the reasons the client expected.

The parents both had long-term disabilities. A special bathroom was needed with a walk-in bath and a stair lift was required.

This opened the door to the zero-rating available for certain goods and services supplied to long-term disabled individuals.

If you have any queries regarding VAT on a granny annexe, or house extension, or buying equipment in relation to a disability, please get in touch.

To discuss how this may affect your clients or your business, or to talk about a VAT issue in general, please get in touch.
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