Pictured above: Steve Holden, Associate and Tax & Trust
Manager at MFG Solicitors
DIY housebuilders and those building holiday homes can save
money if they make use of VAT reliefs available but they need to
take expert advice first, Steven Holden, Associate and Tax &
Trust Manager at MFG Solicitors warns.
"It is now becoming more commonplace for surplus farm buildings
and land to be developed for residential use.
"Commercial property developers undertake many such developments
after acquiring the property from the original landowner," he
said.
However, some landowners are now looking at developing
these properties themselves in order to maximise their
profits.
This can be for personal accommodation and for holiday homes to
let following a recent appeal in the courts.
Steven Holden said: "Among the plethora of considerations to be
made when undertaking such a venture one must not neglect to
consider the tax consequences arising from it. Immediately the mind
wanders to Capital Gains Tax, and although this is the most obvious
area in which a liability may arise there are other areas of the
tax regime in which savings can be made, not least of these is
VAT."
VAT is charged on almost everything, and will certainly be
charged on building supplies and the provision of services by a
contractor.
Commercial property developers are, or should be, VAT
registered, so can claim back the VAT they incur on
construction/conversion.
"What then of the individual developer, who is almost certainly
not registered for VAT for such purposes? Even if your farming or
other businesses are VAT registered it is unlikely that you will be
able to reclaim the VAT you incur in developing the property by
that means," said Mr Holden.
"With VAT increasing to 20 per cent next year, it will be an
increasingly important cost to assess when going into this type of
property development.
"However, you should not consign yourself to having to suffer
the VAT charged on the supplies that you require in order to carry
out such developments.
"Provided that you do not intend to use the property as part of
a business or trade, you can take advantage of a scheme for such
"one-off" developments, most commonly referred to as the
"Do-It-Yourself" builders' scheme."
Importantly the scheme only applies to the construction of new
dwellings, or the conversion of 'non-residential' property into
dwellings.
Claims must be made within three months of the building or
conversion works being completed, and they need a great deal of
consideration to ensure the maximum VAT can be reclaimed.
The relief given is restricted to VAT incurred on building
materials and contractors' fees only, VAT incurred on professional
services such as an architect, surveyor or consultant cannot be
included in the claim. It is also necessary as part of the claim to
obtain a certificate from a quantity surveyor as to the inclusion
of items in the claim.
MFG Solicitors tax department can assist you in investigating
your ability to claim under the scheme and also in compiling your
claim for you.