In the wonderful, sometimes wacky, world of VAT, property transactions are a regular feature. VAT and property: preaching to the converted?
Even during the last few years when market conditions have been difficult, we have always found ourselves with a steady flow of advisory projects on property matters bubbling away in the background.
In the first few days of 2014, we’ve seen definite signs of renewed activity in the market.
This is great news for investors, developers, contractors and professional advisers (including VAT consultants!).
One of the specific areas where we are seeing a number of new projects is that of property conversions and regeneration. The types of project we are seeing include ‘bedsits’ being turned into apartments, commercial properties changing use to residential, empty homes being brought back into use, and, the conversion of property into student accommodation.
Projects of this nature can be very tricky from a VAT perspective and there are numerous traps which can all too easily turn a successful, profitable project into a VAT nightmare.
If you are planning to acquire a property and refurbish, convert, extend or change its use, you need to think about the potential VAT consequences as early as possible in the process.
Major conversion projects can give rise to extremely complex VAT issues and may in many cases, onward exempt supplies will be made. This is almost certain to restrict the amount of VAT which can be claimed on costs. At worst, this could potentially increase the bottom line cost of a project by 20% – more than likely wiping out most if not all of the margin if VAT has not been correctly managed and budgeted for.
In many cases, the position can be significantly improved. In one recent case we handled, our client was around £150,000 better off as a result of what was, in the end, no more than common sense forward planning and ‘good housekeeping’.
It pays to be ‘VAT savvy’ when planning for this type of project.
Need to know more about the issues involved and how we can help? Get in touch at Rhona.firstname.lastname@example.org or give us a call on 01484 538351.