Non-profit businesses and VAT

Many of the not-for-profit businesses that require our help operate within the housing sector. They are most often registered social landlords or housing associations.

We recognise that VAT remains a significant burden on RSL’s, with substantial amounts of VAT expenditure being irrecoverable, and increasingly complex demands being made on officers.

As VAT is a transaction based tax, it is important to adequately consider its implications prior to transactions taking place. This allows planning opportunities to be recognised, budgetary issues to be confirmed and any necessary planning arrangements to be considered and implemented.

Here at The VAT People, we have considerable experience in addressing VAT issues for RSL’s and can help you in a cost effective and beneficial way.

Construction of new housing stock

In general, services supplied by a builder in the course of construction of new housing stock are zero rated. Whilst the RSL will not therefore incur VAT on building costs, subject to the RSL’s intention with regard to the new housing, VAT cost incurred on professional fees associated with the development are likely to be irrecoverable.

It is often possible with the implementation of a relatively simple planning arrangement to ensure VAT on professional services is fully recoverable. It is also possible, subject to the partial exemption calculation method, to structure the planning arrangement in such a way as to enhance recovery of overhead VAT.

Stock transfers

It remains common for RSLs to accept stock from local authorities. Such transfers are usually accompanied by a refurbishment programme, for which the RSL is grant funded. It is likely that VAT costs on refurbishment will be wholly irrecoverable, causing a substantial VAT loss.

However, planning arrangements are available which can enable full VAT recovery on refurbishment costs throughout the subsequent life of the agreed programme.

Partial Exemption and Capital Goods Scheme Reviews

We have extensive experience of considering the recovery of overhead VAT using the partial exemption method, and identifying whether a better, more VAT efficient method is appropriate. This is also the case for Capital Goods Scheme items where claw-back of initially recovered VAT is the issue.

New office accommodation

In view of the increased size and scope of RSL activities in recent years, an increasing number of RSLs are either considering, or actually, relocating. There are several potential opportunities for mitigating the VAT cost, or increasing the recovery of VAT, in relation to such developments.

We strongly recommend that advice should be sought at the planning stage of any office development.

Reduced or zero rated reliefs

We currently work for a number of clients who have been charged VAT on certain works at 17.5%, even though the VAT charge should have been made at the reduced rate of 5%, or the zero rate in relation to conversions on works to listed properties.

Our expertise allows us to identify and establish where such reliefs, on schemes over the last three years, are available, and take the necessary action to ensure the VAT savings are made.

Due diligence

There are currently increasing numbers of RSL mergers and joint venture partnership arrangements. We have recent experience of undertaking due diligence reviews to confirm whether VAT has been treated correctly in the recent past, and whether any future opportunities exist.

For a free initial view on the VAT implications of any development project, then please do not hesitate to contact us. This service is designed to reduce the VAT cost of your development projects so you have nothing to lose and VAT to gain!

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