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Can input VAT be reclaimed on new build costs ?

Reclaiming input VAT on expenses for new build

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Have taken on a new engagement and trying to work out what is going on !

Client has company A - a property development company, and company B - a construction company.

Company B is incurring all material and labour costs on the building work undertaken for company A.

Company B is issuing sales invoices for round sum amounts to company A on a regular basis - some of these are standard VAT and others are zero-rated.

Company B is reclaiming VAT on some expenses and not on others.

So presumably company B should be invoicing company A for all new build work zero-rated and everything else standard rated ?

It will therefore presumably be necessary for company B to identify what costs incurred are attributable to new build not reclaiming the VAT, and what costs relate to all other work where VAT can be can be reclaimed.

Is this correct ?

Am not sure how the value of the sales invoices are being measured given the round sum amounts and how they are being attributed to between new build and other building works.

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RLI
By lionofludesch
01st Feb 2019 11:11

Assuming that we're talking about residential new builds, what you have here is a record-keeping problem.

Just sending a few quid every so often with a random choice of standard or zero VAT is not going to be good enough for the VATmen when they call round.

It may be that deep in the vaults is the detail you require. But it's not sounding good.

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JCACE
By jcace
01st Feb 2019 12:26

pdorrington wrote:

It will therefore presumably be necessary for company B to identify what costs incurred are attributable to new build not reclaiming the VAT, and what costs relate to all other work where VAT can be can be reclaimed.

Is this correct ?


Unless Company B is partially exempt, it should be entitled to reclaim all its input VAT.
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Replying to jcace:
RLI
By lionofludesch
01st Feb 2019 12:41

Company A is likely to be the bigger problem as it could well have exempt sales.

Company B might have standard, zero and reduced rate sales. Maybe exempt too but probably not, given that their sales seem to be to a property development company.

The OP is going to need to look at each company's activities fairly closely to see who is doing what.

This can very easily end up being a bit of a mess.

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chips_at_mattersey
By Les Howard
01st Feb 2019 13:53

Do note you will need to check the rules for the Reverse Charge, taking effect from 1 October this year.

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