Building property for rental

Building property for rental

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VAT

1. Presumably if the land is owned by the subsidiary and the completed houses are transferred to the holding company, then the supply will be the first grant of a major interest and the supply from subsidiary to holding company will be zero rated.

2. However, if the land is owned by the holding company, which rents the houses out when they are complete then there is no first grant of a major interest and the supply (rental) will be exempt from VAT, precluding the recovery of input tax.

Corporation tax

Option 1 would appear to be the way to go for VAT purposes. However,

1. Under this option, the completed houses will presumably be transferred at market value, thus crytallising a profit is the accounts of the subsidiary. Thus tax will be payable on a profit that hasn't been realised.

2. Under this option, these properties would already be owned by the holding company, so there would be no transfer and no corporation tax. (but the negative VAT implications).

Is my understanding correct? Is there any way of the client acheiving their objectives without these negative side affects?
Rob

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By davidgough
27th Apr 2005 16:23

Can you clarify the question please?
Part of the question appears to be missing. Can you set out the facts as well as the questions please.

David

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