Voluntary VAT Registration

Voluntary VAT Registration

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A builder wants to convert an outbuilding in his garden into an office. He has not reached the VAT Threshold and is therefore not VAT registered. If he registers voluntarily he can claim the VAT back on the conversion costs as it will be soley for his business use. Apart from the usual pros and cons of registering for VAT before reaching the threshold, I cannot see any reason why he shouldn't do this.

The conversion costs would have to be capitalised - further investigation as to exactly what costs could be capitalised needs further investigation on my part.

Any comments would be most appreciated

Thanks

Replies (3)

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By User deleted
18th Feb 2010 09:36

One reason for not doing this springs to mind......

.....if part of his PPR is used SOLELY for business purposes, this part then becomes chargeable to CGT when PPR disposed of.

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By User deleted
18th Feb 2010 11:54

and of course...

Once you've clearly defined the building as solely for work - You'll have no chance of avoiding Business Rates...

Is the business paying market rent for the building (which in turn means taxable income for the homeowner)?

I went through this process - In the end I decided it would be less hassle to just accept the fact that this was a personal purchase of a Home-Office/Summer House and give up on the idea of claiming the VAT.

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By nick farrow
18th Feb 2010 15:38

my current understanding having just researched this

you can claim the input tax on a reasonable proportion of the busines use eg 85% of the conversion costs without risking having to repay the VAT on a disposal and again if the use were not wholly & exclusive for business eg 85% then the PPR relief should not be jeopardised and in any case how much CGT is at stake after costs, ER and annual exemption(s) and presumably a small overall proportion of the gain anyway

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