Var zero rate Build to rent

Didn't find your answer?

Build to rent: i wish to build six house on a freehold piece of land  and rent them out, but want to zero rate the new builds to recover vat on purchases of materials etc, previous advice is to form a ltd co and sell to the co but then wont it be shooting oneself in the foot as i presume open market value will create tax liabilities , sdlt etc, is there any way to zero rate but not sell the units ? it seems at odds to discourage btl by not allowing vat recover on new builds.

Replies (8)

Please login or register to join the discussion.

avatar
By Accountant A
13th Jan 2020 11:44

peteselect wrote:

it seems at odds to discourage btl by not allowing vat recover on new builds.

The Government has made numerous tax changes to "discourage" BTL so it's entirely consistent.

Anyway, you need to take professional advice before doing anything further.

Thanks (0)
paddle steamer
By DJKL
13th Jan 2020 11:59

Rather than moving the property maybe consider using an intermediate Buildco to provide design and build service to end user Co . So all costs go through Buildco which builds and invoices end user for the works.

You want a decent accountant who understands vat on property , CIS and also, if lenders involved, understands the art of the possible re them and the flow of monies/security position etc., staged works signed off/valued etc

You also need to think very carefully re warranties amongst the construction team- architects/surveyors et al and how the ultimate owner can rely on same during build and after completion- remembering the most dangerous part of development is part way through.

The secret is do not start doing anything before the structure has been sorted/agreed, for that an accountant and possibly solicitor versed in development/banking need brought onboard at front end.

Thanks (1)
Replying to DJKL:
chips_at_mattersey
By Les Howard
13th Jan 2020 13:49

Great advice for BTL. The basic structure is simple, but there are numerous pitfalls to avoid. A mistake could cost you your profit, so get a good Accountant to walk you through.

Thanks (0)
avatar
By The Dullard
13th Jan 2020 12:07

Who's supplying the materials to whom?

Thanks (0)
paddle steamer
By DJKL
13th Jan 2020 12:13

"Var zero rate Build to rent"

Suddenly realised you are talking about VAR, I hate VAR, wrecks the flow of games imho.

Thanks (0)
Replying to DJKL:
avatar
By Whatisname
14th Jan 2020 09:13

Me too. Thought I was on the wrong forum!

Thanks (0)
avatar
By peteselect
13th Jan 2020 19:32

so would it be feasible to form a ltd development co and invoice the land owners as a ltd co is a separate entity?

Thanks (0)
Replying to peteselect:
paddle steamer
By DJKL
14th Jan 2020 10:30

Yes- Limited Co acts as buildco- subject to sorting warranties one may also be able to get design/build prof fees through as well (saving vat on these) as buildco in effect offers a design and build service and prof fees are merely part of the supply and follow the main zero rate supply.

Alternative is a third party builder buys in all labour and material costs and supplies these as zero rated supply, but if client wants to try to directly direct/control the build/buy the materials then buildco is the usual way.

From my painful experience the perceived savings from running projects oneself (not paying Buildco's margin on a contract) rarely come through and cost overruns are in our case more likely, but maybe that is just us on 25-35 unit builds or the fact that one of our directors is an architect who always kept tweaking designs throughout the build.

(Rule one- get a design, make sure it is correct, make sure it what you want, do not change it during the build process unless you really have to, follow this and costs are possibly controlled, flaunt this and prepare to be shafted by dayworks and variations etc)

Thanks (0)