19th June 2012
Areas of VAT interest reported on by our accountancy associates range widely from VAT and International services (worthy of a newsletter in its own right!), through to partial exemption and VAT on Property. Listed building VAT changes from the Budget remain at the moment likely to change although the consultation on this closed last month and there was strong opposition to such an immediate change in VAT liabilities.
Grants, as opposed to Contracts, was also a topic mentioned and we have commented on the matter in this newsletter. We would certainly highlight it as an audit concern for discussion at year-end audit meetings.
Property activities, whether within the assets of a business or through a property trading business, remain a VAT management concern. HMRC are increasing their interest in the (seeming) lack of application across sectors of the Capital Goods Scheme which impacts directly on sectors involved in VAT-exempt or non-business activities. Partial exemption methods need to be looked at to establish where a separate capital goods “pot” should be included and remember any change to a partial exemption special method needs prior agreement with HMRC.
Property issues invariably bring a larger than average risk of VAT just due to the values involved and a number of you are dealing with businesses or individuals where minimizing the VAT they incur on costs will be important, either because they are not VAT registered or because they operate in a non-business or exempt business environment. Don’t forget that non-business activities can open opportunities to relieve construction costs from VAT even if not all of the building will have a non-business use, so there are some advantages here especially for charitable bodies.
Often the VAT cost on a property project can be relieved through the use of the “option to tax” but the application of this should be discussed prior to opting such is the longer term impact of this decision - 20 years! Sometimes, despite the best of intentions by the vendor, the option to tax can be dis-applied by the planned purchaser of the site dependent on their intended use, so vendors may find themselves facing an irrecoverable VAT adjustment if their own planned taxable supply in the site, changes into a VAT exempt one!
A final comment on a specific issue is not to forget that where clients own property jointly with other separate business entities HMRC will be keen to see a separate VAT registration in place should that property come up for disposal. It can be debated with them but at least be aware that this could be their stance.
Such was the range of property related suggestions from our accountancy associates I’m going to suggest that I put on a half-day VAT Awareness Session for the sector in Wales on VAT and the Property Sector if there is sufficient interest from our network in attending. We’ll hold it at our offices in Langstone on 17th July from 9.30am and places will be limited to 12. Cost will be £90 plus VAT. Should this idea appeal and you’d like to register your interest in attending, email firstname.lastname@example.org.
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