Hi,
I have a new enquiry that I would appreciate advice on as I have not dealt with property developers before and am unsure whether to take this one on.
Client is a builder. He owns land that he intends to build 5 new houses on.
His previous accountant advised he form a new VAT registered ltd company to build these houses for him. Company will reclaim input tax on building costs.
He is undecided whether houses will be sold on or let when completed.
Old Accountant apparently was too expensive, client said he'd do it himself (he confesses he is dreadful at paperwork) and has now given up (two hurredly prepared DIY nil VAT returns later).
I know there's not much info here, this was based on a brief phonecall, I'm meeting him in a few days
Is this a common strategy? Are there any other specific issues I should raise with him?
Appreciate any comments to help decide whether to pursue
Thanks in advance
Replies (3)
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Property Development
A separate company option can help, especially if there will be sale and rental sales. Monthly VAT returns assist cash flow. But do get advice on potential SDLT on sales from company 1 to company 2.
If the client wants a tax-efficient arrangement, he will have to pay for it!
Mess
There are quite a few bear traps here and I would worry that you don't have the knowledge or experience to sort this out. Never the less here's a few pointers/questions
Is he currently VAT registered?The Self build VAT scheme is completely wrong in this context (if that's what you mean by DIY returns)You can only claim input tax in respect of a taxable output. Renting out domestic accomodation is an exempt output so you need to deal with thatThe first time sale of domestic accomodation is zero rated, that's why the company was suggested as the letting of a house after the sale does not change the zero rated supply and protects the input tax recoveryIf you use a company and sell to the owner to let out, SDLT will be incurred
That's your starter for ten.