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Plant hire new build vat rate

zero rated vat on new build

My client has purchased some land on which he is going to build a detached house to live in.  He could go down the DIY self build vat route and claim back vat at the end of the project on allowable items. However he does own his own property development company, which has been in business for around 6 years and is vat registered. My question is can the company being engaged on a Design and Build basis and claim back all the vat it incurs including plant hire, scaffolding hire, architect fees etc (which is normally charged at 20% on new builds). Then when the company invoices the client i.e. director, he bills in stages e..g Invoice 1 - Design and build phase 1, Invoice 2 - Design and Build phase 2 etc. the invoices would not give any great detail and therefore would be zero rated?  In this way the company claims back all VAT and is able to zero all labour/supplies/plant hire etc to client/individual - or would the vat reclaim by the company/contractor on things such as plant hire not be allowed because it is going to be used on a new build (Please note that I am an accountant but not a vat property specialist. I am also not seeking any cgt advice).

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21st Nov 2018 09:56

I would use a D&B, as you describe, and ensure all sub-contractors invoice the development company. VAT charged to the development company will be recoverable - this applies whether or not it is a new build.
This is HMRC guidance: https://www.gov.uk/government/publications/vat-notice-708-buildings-and-... see para 3.4.1
And check the new Reverse Charge rules for the sector, which apply from next October - or will you finish before then?

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By DJKL
21st Nov 2018 10:52

And professional costs like architects etc can be subsumed.

The catch with this is if say the architects make a hash re their drawings/design then the end client strictly has no contractual relationship with them.

If the individual subsequently wants to litigate with the architects he likely needs collateral warranties sorted before the project starts- we once had a firm of architects being "difficult" when we were selling a site they had done the drawings for, the purchaser wishing to use their design/drawings- they wanted an extra fee for transferring obligations so agree right to transfer at outset of initial instruction.

As his company is the one with the contracts with the team then in absence of collateral warranties you could end up with him needing to sue his own company who then, suffering loss, could sue the professional team.

A decent construction lawyer is advisable if you decide to go the whole hog and include the professional team into the design and build (Strictly the same also, of course ,happens re faulty materials sold to the buildco but hopefully these picked up on site as you go)

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By pauld
21st Nov 2018 11:10

Wow !- thank you both for great advice - I had not considered the legal implications.

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