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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.
There are two fundamental questions here:
1. Did the sale of the business qualify as a Transfer of a going concern (TOGC). If a business sale qualifies as aTOGC, the TOGC rules apply (mandatory) and the supply is outside scope of VAT. The main conditions are that the business is transferred as a ‘going concern’; intending to carry on the same kind of ‘business’ (not necessarily identical);- purchaser must be VAT-registered or immediately after transfer (which you were). In that case the seller should not charge VAT and neither should you claim VAT.
2. Whether the business broker /agent is VAT exempt or not. The recent litigation at the Court of Appeal in InsuranceWide.com Services Ltd and Trader Media Group Ltd, where it was held that certain supplies of insurance introductory services provided via the internet were exempt from VAT. Following that decision, HMRC accepted that insurance introductory services are exempt from VAT where the provider of such services (“the introducer”) is doing much more than acting as a “mere conduit” through which a potential customer is passed to an insurance provider.
In HMRC Brief 31/10 HMRC detail four conditions that they expect to be present to secure exemption on the introductory services:
-The introducer is engaged in the business of putting insurance companies in touch with potential clients or more generally acting as intermediary between the two parties.
-The introducer provides the means (e.g. internet “click through”) by which a person seeking insurance is introduced to a provider of insurance.
-That introduction takes place at the time a customer is seeking to enter into an insurance contract.
-The introducer also plays a proactive part in putting in place arrangements under which that introduction is effected.
Where these conditions are met your supplies should be exempt.
Firstly an assessment is based on commission’s “best judgement” [VAT Act 1994] and within time limits [Weight Watchers helps to explain]:
– 2 yrs from VAT return period OR 1 year after new evidence
– Overall 4 years max (20 years if fraud or criminal conduct)
– if there is a court decision ≠ reset of the 1-year clock. If HMRC was concerned they could raise a “protective assessment”
– No time limits for “Books of prime entry” requestsIf no evidence of carelessness/deliberate understatements, resist penalties and appeal.
The appeal process is as follows:
1. You are entitled to a review by independent office <30 days & HMRC to complete review <45 days
2. Review decision can be appealed to either FTT or UT <30 days
3. When applying for a review, the courts need details of the appellant & representative details, details of case,
4. Noting requirement for tax to be paid before Appeal court (but not on a Review) unless potential hardship application and interest is due date to settlement
5. The FTT court categories court cases before UT – default paper (not hearing), basic, standard or complex (tend to go straight to UT)I advise to get legal representation if need be. OR consider potential agreement prior to hearing. And if the case goes that far and you know you are losing, you have potential to withdraw and avoid further costs.
Also note the courts do not reimburse costs unless if party HRMC acted unreasonable (rare for HMRC to pay) hence weigh costs vs benefit before appeal.
This is possible if you can arrange an agency relationship between the parties.VAT legislation recognises two types of agents; disclosed and undisclosed. The agent acts on behalf of another, referred to as the Principal. The Principal authorises the agent to act on his behalf and under his direction. The agent represents the Principal in its dealings with third parties. The relationship between the Principal and agent can be disclosed or undisclosed to the third party. A disclosed agent acts in the name of the Principal, whereas an undisclosed agent acts in his own name.
Dislosed or undisclosed effects where the goods or services are deemed to be supplied for VAT purposes. The place of supply of the goods or service impacts upon the VAT registration and on-going compliance obligations of both the Principal and the agent.
Consideration should be given to the terms of the contractual legal agreement between the agent and its Principal so that they reflect the commercial reality of transactions between them.
As a general rule, when VAT is incurred on non-residential buildings, then, as long as they are used for business purposes, it would be expected that 100% of the VAT is recoverable if you are VAT registered. However care should be taken if any buildings are let and it may be that planning is necessary in order to achieve full recovery.
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).
VAT rules provide that a supply of car parking, either by way of sale or rent, and whether of a garage or parking space, is standard rated. … The sale (or long lease) on new domestic property where the car parking is ancillary is zero rated.
1. If you register for VAT, you will be able to reclaim input VAT on goods and services supplied to you, provided VAT was charged i.e. you have a valid VAT invoice.
2. If you trade under VAT registration limit, you can apply to HMRC to cancel your registration. HMRC would not de-register on their own accord.
The VAT treatment of share transactions has historically been a complex issue particularly for taxpayers in terms of whether VAT can be recovered on related costs. HMRC finally published its latest guidance earlierin 2017 in VAT Manual VIT40600, which sets out what it now considers to be the criteria for input tax deduction by HoldCos (holding companies) with the two main conditions for VAT recovery being shown below:
1. It must be the recipient of the supply, i.e. it has contracted for the supply (including by novation), it has made use of the supply, and has been invoiced and paid for the supply; and
2. The costs on which VAT is incurred must have a direct and immediate link to taxable supplies conducted by the HoldCo (or the VAT group that the HoldCo is a member of) and this is supported by management fees, supplying interest bearing loans to non-EU,
EU SUPPLIES:
If your business sells certain digital services to consumers in the wider EU, from 1st January 2015 you have to charge them local VAT based on where they used the service.
Instead of having to register for VAT with all the different countries in the EU where you may have customers, you can register with HMRC in the UK to use their “Mini One Stop Shop” (MOSS) and report and pay the VAT you charge under these rules to HMRC instead.
Please note, you have to charge this local VAT even if you are not registered for UK VAT!
Supplies to businesses, and sales of physical goods, are not affected by these new rules.
OUTSIDE EU
Outside EU – outside the scopeYou will need to have proper systems in place to capture the data.
Kind Regards
HMRC’s advice for businesses is to choose the trade sector that best matches the activities of your business. In some cases, this is quite simple but there are instances where the activities of the business are relevant to multiple sectors.
The law (SI 1995/2518, Reg 55H) states that “the appropriate percentage shall be that specified in the table for the category of business that he is expected, at the relevant date, on reasonable grounds, to carry on in that period”.
Notice 733 describes the procedure for a business choosing its rate, stating that: “The descriptions of the sectors are not technical and use ordinary English. So if there is a match or a close fit, use that sector.”
In summary the rules can be summed up as:
1. if you are obviously X category but you has chosen Y category, then you or HMRC can correct this retrospectively as this is “an error”.
2. if you could be X or Y and has chosen X, but HMRC prefer Y: then HMRC cannot assess for back tax (because the trader’s choice was reasonable), but HMRC can insist on Y going forward (because that is also a reasonable decision and the tribunal cannot overturn it).
Hope this helps.
If you are struggling to come to a decision you can ask HMRC for guidance but ultimately the decision falls with you.
You can find more information on flat rate scheme on VAT notice 733 and perhaps apply to be on the scheme.
HMRC will notify you in writing if your application is successful. The letter will tell you the date you can start to use the scheme. This will normally be from the start of the VAT period following receipt of your application. If you request an earlier or later start date, HMRC will consider all the facts including the timing of your application and your compliance record. They will not normally allow you to go back and use the scheme for periods for which you have already submitted your VAT returns.
You can apply for Flat rate scheme at the time you register for VAT, or any later time; not EARLIER. If you apply near the time of your VAT registration, you can start using the scheme from the date you are registered for VAT.
HMRC will notify you in writing if your application is successful. The letter will tell you the date you can start to use the scheme. This will normally be from the start of the VAT period following receipt of your application. If you request an earlier or later start date, HMRC will consider all the facts including the timing of your application and your compliance record. They will NOT normally allow you to go back and use the scheme for periods for which you have already calculated your VAT liability.
Firstly VAT registration is per person (sole trader, company etc) and not per business. Hence these fall under one name – your sole trader business unless you set up a company or another form of “person” and keep the businesses separate.
Please take a look at VAT Notice 733: Flat Rate Scheme for small businesses; Section 4.8 “Businesses that fits into more than one sector”:
“If your business includes supplies in 2 or more sectors, you must apply the percentage appropriate to your main business activity as measured by turnover. If the limited cost business rate applies you must use this rate, see paragraph 4.4. Choose the sector for which your business gets the greater part of its turnover. Don’t split your turnover, or apply more than one percentage.”
1. Yes you can register for VAT voluntarily and charge Vat on your sales but recover input VAT.
2. You only charge VAT from the VAT registration date. You can however recover input VAT for the past 6 months (services) or 4 years (goods still in use).
3. No its either you register for VAT – therefore charge VAT and claim input VAT. Or you don’t register for VAT and do not charge VAT nor claim input VAT.
Hope this helps.
Regards
