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20 August 2009 |
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House Builders – do you let property you have built?
This notice sets out details of a possible VAT claw back if you build a residential property and then let it out.
The letting of unsold property stock is a scenario that many builders have been forced to consider due to the present downturn in house sales and the difficulty for buyers getting the appropriate funding.
When you build a new residential property this is a zero rated transaction for VAT purposes – you can reclaim any VAT added to the cost of materials etc.
If you subsequently rent a house you have built, the rental income is an exempt supply for tax purposes.
The danger is that some of the input tax on material or professional charges previously reclaimed may have to be paid back to HM Revenue & Customs!
The way in which such repayments to HMRC are calculated is complex and beyond the scope of this alert. If you feel you may be affected please call to discuss. We will be happy to work through the specifics of your situation.
In many cases safeguards in the legislation may allow you to rent out a property you have built and not be obliged to make any repayments.
To be on the safe side it is well worth crunching the numbers.
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