Share this content
0
1685

Group VAT registration for property

Can Vat group registration save vat on property development

If a construction company and a property development company were to become group vat registered would the construction company need to charge vat on any labour or materials that it supplied to the property development company?

(property company is refurbishing residential properties for re-sale)

Replies

Please login or register to join the discussion.

avatar
23rd Apr 2018 06:08

There is no vat on intra group transactions but the group can't recover vat incurred on making exempt supplies so I can't see where the vat saving is?

Thanks (0)
avatar
to WhichTyler
23rd Apr 2018 07:53

For residential property renovation I didn't think that the supplies bought were exempt supplies?
Thanks for your fast reply.

Thanks (0)
23rd Apr 2018 08:13

The onward sale of refurbished residential properties is exempt. A Group registration would prevent recovery of VAT on materials purchased, and any sub-contract labour bought in.
If the refurbishment is eligible for the 5% rate, a Group registration may (or may not) cost you more lost input tax.
Are there any other inter-company costs, such as office or overhead costs, to consider?

Thanks (2)
avatar
to leshoward
23rd Apr 2018 09:36

If the properties are exempt from the 5% rate, could the vat paid by the construction company through labour subcontracting and material costs be reclaimed by the construction company without having to be charged to the property development company as it is an intra-group transaction? (Sorry if my question was not very clear)

Thanks (0)
to offshorejetsetter123
23rd Apr 2018 11:01

No. Within a VAT Group, the input tax incurred by the construction company is attributed to the onward exempt supplies by the property company.
A VAT Group treats the two companies as a single taxable person.

Thanks (1)
avatar
to leshoward
23rd Apr 2018 12:09

Sorry I'm struggling a little bit with the language being used. Could you please explain in layman terms if the VAT paid by the construction company upon purchase of materials and labour could be claimed back from HMRC? Thanks

Thanks (0)
to offshorejetsetter123
23rd Apr 2018 12:13

Pay for a fuching accountant! Is that layman enough?

Thanks (2)
avatar
to Portia Nina Levin
23rd Apr 2018 12:22

-.-

Thanks (0)
By DJKL
to offshorejetsetter123
23rd Apr 2018 12:24

The ability of either entity to reclaim vat (whether entity is solely the construction company or is a vat group of both entities) depends on the supplies that entity makes to third parties.

The construction company making supplies to the Devco (and to others) allows it to reclaim the input vat it incurs as it is making taxable supplies, the Devco making exempt supplies has no such ability to reclaim the input vat it incurs.

Where you form a vat group the supplies made to parties outwith said group need considered, if this is just the refurbed residential units their sale is exempt so the group has no entitlement to reclaim input vat incurred as it is not making taxable supplies.

Is that simpler?

Thanks (0)
to DJKL
23rd Apr 2018 12:26

No. You're going to need to translate that into Utter Moron.

Thanks (0)
avatar
to Portia Nina Levin
23rd Apr 2018 12:32

Hope it makes you feel big trying to put others down when unprovoked...

Thanks (1)
avatar
to DJKL
23rd Apr 2018 12:29

That seems to make sense. So the group can only claim input VAT on supplies that it makes to 3rd parties that it charges output VAT on?

Thanks (0)
By DJKL
to offshorejetsetter123
23rd Apr 2018 12:39

Not quite that simple, taxable does not mean actual vat is charged e.g. a zero rated supply is taxable but the actual vat charged is zero.

Have a read re partial exemption

https://www.gov.uk/government/publications/vat-notice-706-partial-exempt...

I strongly advise that you consult an accountant, property and vat is not pleasant,

"Value added tax (VAT) on property is possibly the most complex area of VAT law"

Robert Maas, "Property Taxes 2009/2010", Bloomsbury Professional, page 459

Thanks (1)
avatar
to offshorejetsetter123
23rd Apr 2018 23:49

offshorejetsetter123 wrote:

Sorry I'm struggling a little bit with the language being used. Could you please explain in layman terms ...

Doesn’t your bio describe you as a tax advisor?

Thanks (0)
Share this content