VAT on Rent

VAT on Rent

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Plumber operating as a limited company and is vat registered purchased land on which to build a bungalow with a view to resale.

Now he has decided to rent it.
1. Does he have to charge Vat on the rent.
2. Will there be any vat chargeable when he ultimately sells the house bearing in mind it no longer will be a new build.

Thanks
Jack Baye

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By neileg
20th Jun 2007 13:02

I presume the question is about renting the house, not the land.
This is a potentially complex area and you need expert advice to avoid expensive mistakes.

1. Letting of domestic accomodation is exempt for VAT purposes.
2. If the house has been let, the sale may be exempt. If not, it will be zero rated.

What use the land has been put to in recent times may be relevant.

You need care about what happens to the input tax on materials and services. This will depend on the final use of the house. A likely scenario would be: the company builds the house, sell the house to the director and let the director rent it out. This would make the sale zero rated and ensure the recovery of input tax on the build costs.

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