Reclaiming Vat on refurbished property

by Readers Question

15:16 PM, 17th August 2013
About 5 years ago

Reclaiming Vat on refurbished property

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Reclaiming Vat on refurbished property

I have been absorbing VAT on my refurbished property, about 18 so far over the last four years. Reclaiming Vat on refurbishished property

I’m considering a very large building to convert into flats and houses so the VAT will be considerable amount of money.

My accountant has said it maybe possible to register for VAT but I will also have to provide a service or something else to book out that I would charge VAT on.

So VAT in and out so to speak!

Not just to reclaim?

Anyone any ideas?

Thanks

Helena



Comments

Mark Alexander

15:27 PM, 17th August 2013
About 5 years ago

Hi Helena

I'm not a qualified tax adviser but one question immediately springs to mind. Do you sell the properties after you have refurbished them or do you retain them as investments and then rent them out?

My understanding is that if you sell them you should be able to reclaim the VAT. You would need to get specialist advice on this as the tax treatment is completely different. For example, your profits would be taxed as income or corporation tax if your business is incorporated whereas if you let the properties you will pay CGT on any gains you make when you eventually sell up. So far as I know, you can't reclaim VAT on a residential property which you are refurbishing or developing for residential letting purposes. You can on a commercial property though, for example a hotel or a guest house, so I suspect that's what your accountant was eluding to when he mentioned services. I'm not sure where serviced holiday lets falls into this so again I would suggest you take advice if that's the market you are operating in.

I employ a boutique accountancy firm which specialises in providing advice on these types of matters. They always manage to save me a lot more than they charge me. If you would like me to put you in touch please see the Member Profile of my accountant/Tax adviser and complete the contact form which is embedded into his member profile - see >>> http://www.property118.com/member/?id=452
.

Neil Barlow FCCA ATT

15:48 PM, 19th August 2013
About 5 years ago

Hi Helana,

Mark is correct. In most circumstances businesses are unable to claim back VAT incurred in respect of residential property. However, if a single building is converted into multiple flats (or a commercial property converted to residential) then you should be charged the lower VAT rate of 5% by the businesses doing the work.

Debbie Howard

16:26 PM, 19th August 2013
About 5 years ago

Hi Helena

Following on from Mark and Neil's comments, it can also be possible for VAT to only be charged at 5% if the property has been empty for the past two years. You would need to take advice on this though. Good luck.

helena dolisznyj

21:39 PM, 20th August 2013
About 5 years ago

Reply to the comment left by "Debbie Howard" at "19/08/2013 - 16:26":
Can we claim vat on the materials only as we may do the work ourselves?

thanks!

Debbie Howard

12:03 PM, 21st August 2013
About 5 years ago

Reply to the comment left by "Helena " at "20/08/2013 - 21:39":

Hi Helena

I believe it would work in that businesses doing the work would be able to charge you 5% rather than 20%. You would need to get independent advice if you are planning on doing the work yourselves.


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