Reclaiming VAT on house extension
There are two ways to account for private use of a business asset. If it is not a capital item you can claim all the input tax and then pay VAT on the value of the private use. Alternatively for all types of purchases you can restrict the amount of VAT you reclaim to reflect the expected non-business use.
This is ignored if the private use changes, but when you sell the asset VAT should be accounted for on the same percentage of input tax that you reclaimed. But if the sale of the asset is exempt then there is no clawback and the sale of residential accommodation is such a type of sale.
But watch capital gains tax.