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option to tax

do you need to opt to tax land in order to reclaim input tax on works?

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Client runs a livery business currently VAT exempt, about to start work on land development project and wants to reclaim vat on works. do they need to do an option to tax in order to do that or can they just vat register?  after the works are done they will charge vat on the livery services relating to that land. the works will cost about £200k

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By LAURA BUTLER
01st Jul 2020 15:32

thanks taxdragon but the property is already owned so im not sure that article is relevant? or am i missing the point?

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Psycho
By Wilson Philips
01st Jul 2020 15:47

If the services are currently exempt, what would suddenly make them VATable?

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By LAURA BUTLER
01st Jul 2020 15:52

thanks wilson phillips, the new supplies will be different

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Replying to LAURA BUTLER:
Psycho
By Wilson Philips
01st Jul 2020 16:18

The purpose of the option to tax is to make a non-taxable (ie exempt) supply taxable. So if the supplies are already VATable there is no need to opt to tax.

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By LAURA BUTLER
01st Jul 2020 16:26

Wilson Phillips that’s great news - so the company can just claim the input back and then charge vat on the vatable sales after and that’s all we need to do?

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Replying to LAURA BUTLER:
Psycho
By Wilson Philips
01st Jul 2020 16:31

Provided that the works to be carried out are in respect of land used for the taxable supplies only, yes - with the obvious proviso that you need to register first. If any of the land in question is also going to be used for the existing exempt supplies you may need to restrict your input claim.

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Replying to Wilson Philips:
chips_at_mattersey
By Les Howard
01st Jul 2020 16:43

… and you will need to check whether your need permission to opt, since you have already made exempt supplies.

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Replying to leshoward:
Psycho
By Wilson Philips
01st Jul 2020 16:56

Assuming that an option is in point. If the new supplies are taxable, no option required (in respect of those supplies). I suppose that we can assume that the existing supplies are exempt by virtue of being a supply of land, but we don't really know. And would an option be worthwhile? Too many unknown variables.

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By LAURA BUTLER
01st Jul 2020 16:48

Thanks both that’s very helpful
My slight concern is that the new supplies are in the grey area between vatable and exempt livery so if they charge vat on it would that make it ok?
This is making my head spin

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Replying to LAURA BUTLER:
Psycho
By Wilson Philips
01st Jul 2020 16:59

No. The supplies are exempt or they are not. You need to decide which - simply charging VAT on something doesn't make it a VATable supply. You could try to ask HMRC for a ruling if in doubt (although they will probably just point you to the relevant Notice and tell you to make your own mind up).

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Replying to LAURA BUTLER:
Hallerud at Easter
By DJKL
01st Jul 2020 18:18

Lea Brash , a partner at Johnston Smillie, CA, up here in Edinburgh, has a bit of a background with livery services as her family own Castlehill Stables south of Edinburgh, she may be worth contacting.

https://www.jsca.co.uk/dealing-vat-correctly-livery-services-5-tips-unwary/

https://www.jsca.co.uk/our-team/lea-brash/

https://www.castlehillstables.com/

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