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Reclaiming VAT on professional fees on conversion

Reclaiming VAT on professional fees on conversion

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Hi All,

Client is converting some barns into residential properties owned through a Limited company.

We have registered the company for VAT and the builder is charging VAT at 5% (all materials going through them as well).

The client has some invoices for Architect fees and some inital legal fees at 20%. They will also have our fees going forward. Can these be reclaimed at all? If someone could guide me as to where i could find this information on HMRC as well that would be great.

Thanks

Replies (11)

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Stepurhan
By stepurhan
06th Sep 2021 09:53

What has changed since you posted a similar question in April?

https://www.accountingweb.co.uk/any-answers/reclaiming-vat-on-barn-conve...

The answers then would seem to cover what you need.

At that time, you weren't planning to register your client for VAT at all. Now you have. If you didn't consider the issues you are raising now in advising the registration, you might want to check your PI insurance.

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Stepurhan
By stepurhan
06th Sep 2021 09:54

[Duplicate]

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Replying to stepurhan:
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By Largerdanlife
06th Sep 2021 10:01

Hi Stepurhan,

My previous question was more in relation to being able to reclaim any VAT at all which we did receive tax advice for and are happy with the VAT reg plus costs from the contractor. My question is on costs that fall in the 20% bracket and if these can be reclaimed.

Thanks for your concern.

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Replying to Largerdanlife:
Stepurhan
By stepurhan
06th Sep 2021 13:21

So I was correct that the answers to you previous question cover this situation. I suggest you go back and read them.

I'm really not sure why you think the position would be different for inputs at different rates. Either they are inputs related to taxable supplies, or they are not. This is not one of the more difficult parts of VAT, of which there are many.

I still think it is unwise for a professional to be asking these questions AFTER registration. It's not like the expenses you are talking about will have come as a surprise, given the nature of the business.

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Replying to stepurhan:
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By Paul Crowley
06th Sep 2021 10:12

Concur

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By Paul Crowley
06th Sep 2021 10:11

What supplies will the company be making?
Is it going to be a seller of buildings or letting residential property.

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Replying to Paul Crowley:
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By Largerdanlife
06th Sep 2021 10:52

Hi Paul, all properties will be sold at xero rated. thanks

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Replying to Largerdanlife:
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By Paul Crowley
06th Sep 2021 13:03

So a different client to last time you asked or a different intention.
Read Jason
I stand by my suggestion last time you asked

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Jason Croke
By Jason Croke
06th Sep 2021 10:42

Right to reclaim VAT is not based on being VAT registered, it is based on the business making taxable (VATable) sales.

So what is the intention once the barns are converted, is the intention to sell or to rent or both? What if the intention is to sell but your client can't sell them?

I see you sought advice earlier and if the decision to register for VAT was the outcome of that advice, then presumably the advice should have also covered off the point re. intention to make taxable supplies, not exempt ones.

The VAT - whether it is 5% or 20% - can be reclaimed, but only on the basis the intention is to sell. If that intention changes to renting the properties, then the VAT (or a proportion of it) is potentially clawed back by HMRC.

Notice 708 deals with the topic of construction and VAT https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#se...

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Replying to Jason Croke:
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By Largerdanlife
06th Sep 2021 10:57

Hi Jason, intention is to sell so zero rated taxable supply.

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By The Dullard
06th Sep 2021 13:06

Let me get this straight:
- you have a client that is doing property development without tax advice from a competent professional.
- you're trying to give tax advice to a property developer without the necessary competence.

You both need your heads banged together.

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