Share this content

VAT on FHL

VAT reclaim Furnished holiday lets

Didn't find your answer?

Hi All

I have a client who has 4 holiday let homes held in a partnership with her husband. 2 of the properties have been let for 2 years following refurbishment of them. The other 2 properties were acquired in the past year and are currently being refurbished. The client has registered the partnership (encompassing all 4 properties) for VAT from April as this is when the VAT threshold was breached. I am now preparing the first return which is for April to September. I have some questions I am hoping you wonderful people may be able to offer some guidance on.
 

1. The Initial VAT return can encompass capital items purchased 4 years pre VAT reg which are still in use - can this include some of the refurbishment costs ie things like building materials that are ‘still in use’ at the time of the registration? I understand the services element ie labour won’t be allowable as it’s only for goods

2. 2 of the properties are currently under redevelopment. These will be let out as FHL as soon as completed. Can the input VAT on all of the costs incurred on development be reclaimed? The costs are not expected to exceed 250k therefore capital goods scheme shouldn’t apply.

3. Does any of the above have any bearing on the tax treatment when the client comes to sell the properties?

 

Thank you in advance for your help

Replies (5)

Please login or register to join the discussion.

avatar
By VATs-enough
24th Oct 2021 09:32

"2 of the properties have been let for 2 years"

That doesn't sound like holiday letting (taxable). That sounds like residential letting (exempt).

EDIT
Or are you saying they have been let as holiday home lets for the last 2 years?

Thanks (0)
Replying to VATs-enough:
avatar
By Sarah2021
24th Oct 2021 10:39

Yes I mean they have been let as holiday lets. Sorry I didn’t write that very clearly!

Thanks (0)
Replying to Sarah2021:
avatar
By VATs-enough
24th Oct 2021 14:48

Regards the pre-reg input tax, you might struggle with building materials unless the business purchased these separately. If they were part of the contractors supply, then HMRC will resist the claim. There have been a few tribunal successes in this area, splitting out the goods from services, but don't expect HMRC to roll over.

Regards other goods purchased for the business, and still on hand, then VAT can be claimed subject to normal rules.

Regards construction costs for the newer units to be used as holiday lets, yes VAT should be deductible.

Thanks (1)
By plummy1
26th Oct 2021 14:30

Could I ask who you are using to undertake the capital allowances claims on these properties?

Thanks (0)
By plummy1
26th Oct 2021 14:30

Could I ask who you are using to undertake the capital allowances claims on these properties?

Thanks (0)
Share this content