Steve Chamberlain says â€œadvising on property projects probably accounts for 50% of our workload.
A lot of our work is with educational charities, especially but not exclusively with Oxford colleges. Some buildings may qualify for a â€œnon-businessâ€ use relief, either where the building is used for charitable research or in connection with the education of under 19â€™s. And the reliefs for student accommodation are important.
It should be remembered that while building works may be relieved from VAT, separate charges for Architects, Surveyors, etc. are subject to VAT. Often considering a â€œdesign and buildâ€ structure can improve the savings considerably.
Weâ€™ve helped at least a dozen clients in the last year, everything from the construction of a new church and convent to remodelling church halls or other buildings. Here, the emphasis is on maximising the available reliefs from VAT to reduce the impact of VAT on construction costs.
The reliefs are subject to tight criteria, and it is essential to ensure the charityâ€™s plans for the building constitute qualifying use-basically use either for â€œnon-businessâ€ purposes or â€œsimilarly to a village hall.â€
In the main, relief is limited to the construction of new buildings; or works to listed* buildings. However, there are some other reliefs for residential buildings, which have permitted a reduced rate of VAT for a charity converting a farm into a priory, for example.
Over the years weâ€™ve been involved in some very large projects for visitor centres, theatres, and museums, although since funding has become very tight weâ€™ve not seen nearly as many. Typically, relief from VAT on building costs isnâ€™t available, and in such cases the focus is on legitimately maximising the ability of the charity to recover VAT.
The exception is where the cultural activity is not the sole use of the building, which is also available to the local community for use as a village hall, when relief may be available for the building work.
We act for both developers and householders. With householders, the project normally involves reviewing how much of the building work qualifies for VAT relief, either as Listed* Buildings, or where works are for the benefits of disabled residents.
I started a recent talk for the Royal Institution of Chartered Surveyors by saying â€œIdeally, the VAT regime for works to listed* properties would be logical, consistently applied, and easy to understand. But it isnâ€™t...â€ However, discussing practical strategies for managing VAT on Listed* Building projects gave me plenty of material for my talk.
We also assist DIY house builders with their claims for residential developments.
The key is to maximise the developerâ€™s ability to recover VAT on costs. This depends on the nature of the development, which can of course be affected by market conditions. At least four of our developer clients have speculatively built houses for sale, and have recovered VAT on materials, etc. on the basis of their intention to make zero-rated sales.
Having to rent these unsold properties could have unfortunate VAT consequences; and identifying the optimum solution requires consideration of the income/corporation tax; CGT; and SDLT consequences.
Fortunately, we have Gerry Jackson on hand to enable us to give â€œjoined upâ€ advice.â€
*The Chancellor announced changes to the Listed Building relief in this years Budget-see our blog for more details