VAT legislation governing property transactions is complex. The high transaction values means that any mistakes or oversights can be expensive.

Property transactions are not limited to businesses in the property sector and any business buying, selling or leasing property needs to be alert to the VAT implications.

Did you know?

Land transactions can be taxable or exempt

Options to tax are only binding on the party making the option

Building services may be subject to the zero-rate, reduced-rate or standard-rate of VAT. Property sales and lettings could be at the zero or standard rate or be exempt from VAT. The “option to tax” also needs to be considered as this will usually change VAT liabilities and VAT recovery rights.

Special rules  can also apply to VAT recoveries in this sector. Unlike most items of expenditure, VAT on capital expenditure in relation to property may be subject to adjustments for up to 10 years under the Capital Goods Scheme. The rules are complex and advise should be sought if there are any doubts as to how these rules apply.

An additional area of complexity, from 1 October 2020, will be the introduction of a reverse charge in the construction industry. You can read more about this here.

land and property insert

Our cost reduction strategy is based on:

  • minimising payments (for example maximising VAT free/reduced rate charges by contractors on mixed developments); and
  • maximising VAT refund claims.

The key point to remember is that VAT is an unforgiving tax that is not linked in its application to any profit or loss you may achieve. To be effective advice is often required before the transaction takes place. An enormous VAT bill can add insult to injury for a struggling business. Equally a large VAT saving may mitigate commercial problems that otherwise would appear insurmountable.

For further advice or help, please get in touch.

What our clients say

Do you need advice on a property transaction?