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VAT Exempt Supply

VAT Exempt Supply

My Client is a small residential developer. We have recently bought a property to refurbish. Our usual business is development of new build property which is zero rated, however, I think that when we come to sell the refurb it will be an exempt suplly. This property has been empty for over 2 years and I think I am correct in thinking that it therefore qualifies for a reduced rate vat. Do I therefore request that all supplies are made at the reduced rate and if so what do my suppliers require to comply with HMRC regulations?

Obviously as a developer of new homes we are used to claiming all VAT back whereas if the sale of the refurb is exempt we won't be able to claim the vat back on that property, therefore, if VAT can be reduced rated then this will at least give us a slightly better margin.


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01st Jun 2012 21:24

Don't forget the deminimis limit
Confirmation needs to be obtained from the local council that the property has been empty for 2 years.

Also as the business is now subject to the partial exemption rules you need to be mindful of the deminimis rules for non attributable input VAT. Breaching the £7500 annual limit would put a large dent in the margin on a refurb.

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