VAT on Holiday Lettings Sale
My head hurts as I have been reading up on the VAT land & property guide. The situation is that a derelict barn is being converted into several holiday cottages. The planning permission restricts their use so that they cannot be used as permanent dwellings. It seems that the planning restriction makes them standard rated, which is good that input VAT can be reclaimed on the conversion costs, but very bad in that the selling price is deemed to be VAT inclusive, so 7/47ths of the sales value of each is lost to the VAT man. Is this really the right understanding of the position? Is there any way to avoid charging VAT on the sale, even if that means losing the input VAT recovery on the costs. If VAT is due on sale proceeds, it turns the whole project into a loss before it is even started. Help?