Homeowners converting derelict buildings into dream homes could be paying over the odds, warns a leading Kent tax expert.

Whether a disused barn, wagon shed, oasthouse, stable or outhouse, all are popular. But what many buyers don't know is that they needn't pay the full 17.5 per cent VAT on all conversion costs, according to Maidstone-based DSH Chartered Accountants and Business Advisors.

The firm believes buyers and builders may be unaware they don't have to pay the full rate of VAT on all work converting a commercial building for residential use.

Alan Buckett, head of VAT Services at DSH, said: "Too many people make the expensive mistake of assuming that the 17.5 per cent VAT rate applies to all the labour and building materials.

"Your local building contractor may be unaware of the complex VAT rules on different types of construction work and may play safe by charging you VAT at 17.5 per cent on everything. It’s worth checking with a VAT adviser before starting work, to see what aspects of the alteration work are subject to five per cent VAT or even zero-rated."

VAT relief is available for people building new homes, or on projects involving demolition and replacement.

Anyone looking to replace an old building with a new one may be able to save VAT on demolition costs and on adding a conservatory or landscaping the garden, as long as this is done before completion of the new house.

VAT rules allow for money to be claimed back for up to three years afterwards. Contact Alan Buckett on 01622 690666 or alan.buckett@dsh.co.uk