Freehold Management Company

Freehold Management Company and VAT

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A block of flats managed by a RTM company has been in existence for ten years.  5 out of the 9 flats have bought the freehold of the whole block and a Limited (by Shares) company has been set up. It is intended to issue further shares in the freehold as and when other flat owners can afford to buy the freehold at cost value. In the meantime they will still pay ground rent and an agreed service charge. As there are significant capital maintenance projects to be carried out on the block of flats, can the new Ltd Company register for VAT and claim the VAT back if the freeholders create a sinking fund and create a monthly savings plan to deal with the cost of the repairs.

Alternatively would everything be better dealt with through the RTM company and the idea of being VAT registered, scrapped?

If anyone has any experience of this type of set up and can offer advice, it would be most welcome.

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By spidersong
17th May 2016 15:42

What taxable supplies is the limited company thinking of making and to whom?
And if there are any what is the perceived benefit of having an intermediary company charge them VAT on the building works rather than just having the builders they engage charging direct?

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Replying to spidersong:
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By Seventeen
17th May 2016 16:30

The only supplies on the Ltd Freehold company would be the sale of the freehold to the remaining leaseholders. Would this be classed as trading income and therefore sufficient for any VAT on building works to be offset against the trading income VAT.
I am just trying to find the best and simplest/cost effective way of dealing with a situation whereby there are five of the nine flat owners owning the freehold of a block of flats.

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Replying to Seventeen:
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By spidersong
18th May 2016 09:15

The sale of the freehold would be a VAT exempt interest/right over land.
It's unlikely that the company would make any taxable supplies. VAT can only be recovered to the extent that it's attributable to taxable supplies, so no registration and no recovery.
The only way they'd get recovery on the works is if they used them to make a taxable supply and if they're making a taxable supply then they charge VAT and if they're charging VAT on the works to the tenant then there's no saving to be had.

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