business focus 29
Chartered accountants Haines Watts presents a series of articles based on its blogs. It offers analysis, reviews and comments and welcomes your feedback at
www.hwca.com/blog
of the month Opting to tax: Property and VAT
The subject of land and property transactions and VAT can cause headaches because of the complexities involved but are particularly important to get right, especially for landlords. By speaking to a VAT expert, however, solutions can be found for each individual case and the paracetamol averted.
Supplies of land and property are exempt from VAT except:
• First sale of a new build dwelling is taxable at zero rate VAT. Subsequent sales and residential lettings are exempt from VAT.
• Certain supplies of land/ property, such as car park facilities, pitches for tents and caravans etc, are always liable to standard rate VAT.
writes Mandeep Sidhu, VAT specialist
• Sale of a new commercial property (within three years of construction being completed), is taxable at standard rate VAT. After three years any supplies will be exempt from VAT.
• Sale or lease of commercial property that is not new becomes taxable if the owner/supplier ‘opts to tax’ it; then standard rate VAT becomes chargeable.
It’s fair to say that people’s eyes tend to glaze over when the procedures of the ‘option to tax’ regulations are delved into. ‘Option to tax’ is only relevant in the case of commercial properties and there are some supplies which aren’t affected (too detailed to go into here but do ask about it).
Where a supplier has a choice of whether to opt in to charge VAT or not, the pros and cons should be considered. The benefits of opting in include being able to recover the VAT on costs (input tax) in respect of the general maintenance and management of the property from HMRC. The downside is that, once opted, the ‘option to tax’ remains in force for 20 years and is difficult to revoke. Any lease or sale of property with ‘option to tax’ becomes liable to VAT, which can be substantial amounts. It also
increases the SDLT payable on such transactions.
While the rules must be considered carefully, don’t be dissuaded from opting to tax because of the complexities involved. Speak to a VAT expert to explore the opportunities in full.
For further information regarding this or other financial matters visit the website.
Details:
www.hwca.com
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THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2016
www.businessmag.co.uk
JIB200.10.15
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