Updated November 2008
If you are considering a major property acquisition or refurbishment you may find the following notes useful.
One of the main aims of VAT planning is to minimise situations where VAT paid by your business cannot be reclaimed as input tax on your VAT returns. The other area of interest is ensuring your builder charges the correct rate of VAT.
Ask your builder to separate his charges for different types of work. For instance:
• Construction work creating new dwellings is zero rated.
• Refurbishing retail or other commercial property is generally standard rated.
• Refurbishing existing residential property is standard rated.
There are situations where a conversion from a non-residential to residential use can be charged at a reduced rate of 5% VAT.
Option to tax.
You can opt for a particular property (non-residential part only) to be subject to VAT. What this means is that any input tax attributable to that non-residential property can be reclaimed. It also means you will need to charge VAT at the standard rate on any rents you charge. If you do opt to tax you will then be able to recover any input tax paid relevant to the non-residential property – building costs etc.
When you sell a non-residential property that has a valid option to tax; in certain circumstances you will have to add VAT to the sale proceeds.
If you would like to discuss any of these topics, or indeed any other issues, please call.