Vat on residential property

Vat on residential property

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Client is a company that lets out residential properties.

They want to buy a property now decorate it and let it out.

In future they have plans to renovate it and add an extention, and then sell it or continue letting it out.

They want to register for VAT now so they can claim the Vat on decorating/building expenses. From what I know they would not be able to reclaim the vat as this is an existing residential property, so it would not be worth registering.

I would be grateful if someone could confirm my understanding.

Thanks

Replies (6)

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By khalm0
06th Feb 2012 12:40

My understanding is that as it is a residential property, it becomes exempt from VAT, so they cannot charge the tenant VAT, and cannot reclaim any VAT on the expenditure.

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Quack
By Constantly Confused
06th Feb 2012 13:08

I would agree

Unless they are converting it or splitting it into further properties there will be no VAT recovery.

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Replying to 27Spots:
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By aadil
06th Feb 2012 14:01

Thanks ..

Thanks for the replies. Could you please point me to the relevant guidance on HMRC website regarding this as what I found did not answer my queries.

 

 

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Quack
By Constantly Confused
07th Feb 2012 12:19

A thought occurs

I believe the 'backing' to the exempt treatment is due to Schedule 9 Group 1 (VATA1994) http://www.legislation.gov.uk/ukpga/1994/23/schedule/9

i.e., that it is a grant of land (which includes properties) which isn't covered by one of the exceptions.

But a thought occurs, has the property in question been empty for 3 years perchance?  And just to be doubly sure, the property is a residential house which will remain the same number of residential houses correct?  No splitting or combining is being done, just a new paint job and general repairs?

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Replying to Magsl9:
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By aadil
07th Feb 2012 12:48

Correct ..

Corect, Residential house. Just general repairs now and an extention added to it later. No splitting etc. it will remain one house.

 

But how would the answer change if this was not the case? Thanks for your advice,

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Quack
By Constantly Confused
07th Feb 2012 13:22

Well

If you were splitting the property into extra residences, or for that matter converting it from non residential to residential, or if the house had been empty for 3 years, the work may have been able to be charged at 5% which would be much better.

But apparently that isn't the case!

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