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Zero rated sale of residential property to holdco

Being rented out by holdings

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Subsidiary purchased some land and built a 2 bed house, they reclaimed £10k of VAT , they are now considering selling the property to its 100% holding company who will rent it out.

subsidisry does not undertake any other trades, I know it will be stamp duty exempt but will the zero rated sale to holdings mean no clawback of VAT? 

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By Ruddles
28th Oct 2017 09:50

Yes

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Replying to Ruddles:
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By Jigs
28th Oct 2017 10:31

Thank you, why doesn’t everybody do this then? Thought there maybe some anti avoidance legislation stopping it

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Replying to Jigs:
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By Portia Nina Levin
28th Oct 2017 13:30

Everybody does do it. There's even some gudance from HMRC saying you can.

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Replying to Portia Nina Levin:
RLI
By lionofludesch
28th Oct 2017 13:38

Portia Nina Levin wrote:

Everybody does do it. There's even some guidance from HMRC saying you can.

Jaysus! You can't rely on that!!

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Replying to Portia Nina Levin:
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By Jigs
28th Oct 2017 14:19

Thank you, did initially look via HMRC but couldn’t see anything confirming it, would you be able to kindly tell me whereabouts I will find it? Thank you in advance

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Replying to Jigs:
RLI
By lionofludesch
28th Oct 2017 13:39

Jigs wrote:

Thank you, why doesn’t everybody do this then? Thought there maybe some anti avoidance legislation stopping it

Why do you think there should be ?

Fogged .......

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Replying to lionofludesch:
By Ruddles
28th Oct 2017 15:06

I actually consider it to be a reasonable question.

Company A builds a dwelling to let out - no recovery of input VAT. So it transfers property to a connected company B which then does the letting. No effective change of ownership or activity yet suddenly all input VAT is recoverable. I can understand why people think this might be challenged.

However ... the legislation simply provides that the first grant of a major interest (to anyone) of a dwelling is zero-rated, and, as Portia points out, HMRC have expressly stated that they are (for the time being at least) comfortable that no avoidance is involved in such arrangements.

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