Buy, refurbish and sell property – How to claim VAT on conversions

[Hunt]

I’m planning to buy, refurbish and sell a property and make a good profit.

From a VAT angle, how can i recover VAT incurred, do i need to register for VAT and do i charge VAT on the houses.

Someone suggested to me that I could rent a property from my wife, or even rent from myself to avoid paying vat on the conversion works. Does anyone have any experience of doing this?

[vatconsultant]

This VAT on this sort of project can be complex and will depend on whether the property is residential or commercial and whether client proposes to let or sell (you say to let). Also there may be occasions when it is necessary to ensure the contractor treats work as reduced rate – maybe difficult after all the work don

Buy, refurbish and sell an existing residential property is generally an exempt supply on sale, so input vat can’t be reclaimed. As the sale is exempt there is no requirement (indeed no ability) to register for VAT.

Certain circumstances, some building work is subject to a lower VAT rate of 5%:
– renovating residential property that has been empty for more than two years;
– where there is a change in the number of dwellings, for example, converting a house into flats;
– converting a commercial building into residential use, for example, a barn conversion; and
– converting a single household residence into a house of multiple occupation (bed-sits).

The 5% rate applies to building services and related materials, but not to separately purchased building materials.

In my experience a property developer generally registers for VAT where they are able to do so (new build or commercial).

[Author]

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