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VAT & Property

Steve Chamberlain says “advising on property projects probably accounts for 50% of our workload.

Educational Properties

A lot of our work is with educational charities, especially but not exclusively with Oxford colleges. Some buildings may qualify for a “non-business” use relief, either where the building is used for charitable research or in connection with the education of under 19’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 “design and build” structure can improve the savings considerably.

Ecclesiastical Properties

We’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 charity’s plans for the building constitute qualifying use-basically use either for “non-business” purposes or “similarly to a village hall.”

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.

Arts and cultural charities

Over the years we’ve been involved in some very large projects for visitor centres, theatres, and museums, although since funding has become very tight we’ve not seen nearly as many. Typically, relief from VAT on building costs isn’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.

Residential Property development

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 “Ideally, the VAT regime for works to listed* properties would be logical, consistently applied, and easy to understand. But it isn’t...” 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 developer’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 “joined up” advice.”

*The Chancellor announced changes to the Listed Building relief in this years Budget-see our blog for more details