Property developers – make sure you are accounting for VAT correctly

At CHW Bolton Accountants, we have many clients who make a living from purchasing, renovating and either selling or renting out houses. We are often asked about the VAT rules on renovation costs such as architect and contractors’ fees.

Nicola Roby, Director at CHW Bolton Accountants explains that not all costs will attract VAT, the rates can differ and the rules can be complicated:

  • architect’s fees will all carry standard rated VAT – currently 20%
  • if the house being renovated has been empty for less than two years the building work will be standard-rated
  • if the house has been empty for more than two years; meets the conditions for qualifying residential premises; and the services are qualifying services all as set out in section 8 of VAT Notice 708; then the building work will be at the reduced rate of 5%
  • the supply and installation of goods that are not building materials will be standard-rated even if the rest of the renovation qualifies for the reduced rate
  • any materials bought without installation services will be standard rated

At CHW once we have established the VAT our clients might be incurring we consider the VAT position on the sale of the renovated properties and the impact on the recovery of VAT Input Tax.

Sale of a residential property which has been lived in at any time during the 10 years immediately prior to sale will be an exempt supply. As a consequence, VAT Input Tax incurred on the costs of renovation and costs of sale will not be recoverable unless the business is also making taxable supplies.

If, on the other hand, the residential property has been unoccupied during the 10 years immediately before being sold then the sale will be zero-rated as the first grant of a major interest in a newly converted dwelling.

The VAT Input Tax incurred on the renovation and selling costs can therefore generally be recovered.

This can be a complicated area and you should seek professional advice.  For more information on this or any other issue relating to your Small Business Accounts, Nicola Roby at CHW Bolton Accountants on 01204 534031 or via our contact us page.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

DID YOU FIND THIS USEFUL?

Share it with your network:  

Want more great content?
Sign up to our newsletter

Follow us

Tweets by @CHW-accounting

CHW-Accounting
@chw-accounting


Twitter: chw_accounting

Read enough?

Want to find out how we can help you and your business? Get in touch today and let's have a chat.

WHAT'S THE NEWS?

Grab a biscuit and a brew and read our latest news.

4 August 2020

‘Amnesty’ if you’ve claimed too much from the Coronavirus...

by

The Government has published further guidance in respect to compliance and the Coronavirus Job Retention Scheme (CJRS), with specific guidance for businesses who find they have…


Read more >

3 August 2020

Further details of Job Retention Bonus unveiled

by

Following the Chancellor’s announcement on 8 July of a Job Retention Bonus, the Government unveiled further details of the scheme on Friday. Purpose of the scheme…


Read more >

30 July 2020

£20 million in new grants to boost recovery of...

by

Thousands of smaller businesses in England are set to benefit from £20 million of new Government funding to help them recover from the effects of the…


Read more >

22 July 2020

Free credit control review

by

Here at CHW, we are always looking at ways to increase our service offering to ensure that you continue to get full value for money and…


Read more >

15 July 2020

Mini budget highlights

by

Last week, Rishi Sunak pledged to “protect, support and create jobs” and get pubs and restaurants “bustling again” as he unveiled his ‘mini-Budget’ to kick-start the…


Read more >

YOUR CHALLENGES

No matter what your challenge is, we’ve probably dealt with it before.



Need an Accountant?

Get in touch >


Need an Accountant?

Get in touch >


Tax issues?

Find out more >


Tax issues?

Find out more >


Trying to grow your business?

We can help >


Trying to grow your business?

We can help >


Managing cashflow?

We can help >


Managing cashflow?

We can help >


Starting a business?

We can help >


Starting a business?

We can help >


Looking for funding?

Need help with funding? >


Looking for funding?

Need help with funding? >


Buying or selling a business?

We can help >


Buying or selling a business?

We can help >


Adopt the cloud?

We can help >


Adopt the cloud?

We can help >


What else can we do for you?

We can help >


What else can we do for you?

We can help >
CONTACT US

Get in touch, no hard sell, just a brew, a biscuit and a chat.