My client, a limited company, is buying a piece of land to develop into residential flats to sell. As the flats are new they become zero rated for VAT. I believe the company can claim standard VAT on the acquisition of land. Is this correct? Would appreciate your comments.
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Yes.
The VAT on the land is attributable to the company's intended future ZR sales of the completed flats, so it is fully recoverable.
Vat recovery in jeopardy if rented out
It is important that the new build residential property is built with the intention of selling as new properties (=zero rated) - then the VAT recovery is OK.
If on the other hand the newly built property is NOT sold and instead is retained for residential letting then this is an exempt supply putting the VAT recovery in jeopardy.