Design and Build VAT implications

[Gray]

My client, a developer, bought plot of land (no VAT) and seek to:
1. sell half of the plots to purchasers rather than developing the houses first, each plot sold for say £100k
2. The other half, he builds holiday homes and sell for £200k.

Buyers of land may choose their own developer or choose my client as he thinks he will offer a competitive price as he is already on the site.

Planning permission requires property owners not to live in the property for at least one month, though some buyers plan to use the properties as their main residence.

What are the VAT and SDLT implications for both sets of buyers.

[vatconsultant]

1. sell half of the plots to purchasers rather than developing the houses first, each plot sold for say £100k
= no VAT first grant of major interest.

However DIY builders, will normally zero rate the buildings material provided with services if the building qualifies as a dwelling/designed as a dwelling. However given that they are building holiday homes, the cost will be SR

2. The other half, he builds holiday homes and sell for £200k.
=holiday homes are not dwellings and hence SR applied.

SDLT is charged on the total inclusive of VAT. With regards to option 1, care must be taken that this is not an abuse situation where SDLT is not applied to the land on its own yet the developer still provides the building services. Such attacks are less likely given that customers are not forced to use the developer.

[Author]

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