VAT on property

Knowing the ropes is sound advice when undertaking transactions involving property. The default VAT position for all transactions is that the standard rate of VAT applies; however, where VAT interacts with property transactions, not only can the standard rate apply but transactions can be exempt, zero-rated, at the 5% rate and outside the scope.

The VAT treatment of property projects is often determined by reference to whether certain conditions have been met, or intended. For example, the construction of a new property may either be subject to VAT at the zero-rate, reduced rate or standard rate, depending on exactly what is being created, to who, and its purpose! Similarly, the refurbishment or alteration of a property (residential or commercial) may be subject to VAT at the zero rate, reduced rate or standard rate, depending on the type of property, its status and what it is to be used for following the refurbishment or alteration. Notwithstanding this variable starting position, it is imperative that the correct VAT treatment is applied to prevent unnecessary challenge by HMRC, as VAT can only be claimed where it has been correctly charged by the contractor.

Additionally, VAT issues arise on the approved alterations of listed buildings, issue of zero-rated certificate regarding use for a relevant charitable or residential purpose and this is before we get into the issues that arise between landlords and tenants.

This is the first in a series of articles which will consider the above issues in greater detail but when planning a property project, it is vital that the parties involved understand fully what it is they are trying to achieve and consider whether an alternative approach could result in an improved cash flow position or mitigate an unexpected VAT cost.

Contact us

Contact Gerry Myton or Alison Horner of our VAT team for further details or email your enquiry to us.