Land and Property Development

The team of specialists at The VAT People has a great deal of experience in advising businesses on the complicated intricacies of VAT on land and property transactions. 

We have helped many companies to ensure these often very high-value transactions are structured correctly from a VAT perspective in order to ensure any eligible savings are made. Due to this experience, we are well-placed to guide your business through this area. 

The complicated nature of VAT on land and property transactions means that calculating what you owe can be extremely difficult - but we are here to help. 

Contact The VAT People today by calling 0161 477 6600, or fill out an online contact form and we will get back to you at a more convenient time.

How we can help you

As with any legal matter pertaining to property development, VAT is a complex issue that should be dealt with correctly and efficiently. Failure to comply with regulations could mean your business is subject to fines from HMRC, while a lack of awareness regarding specific reliefs could mean you are paying more than you need to. 

However, The VAT People can help to ensure your business is paying the correct amount of VAT on land and property transactions. Our extensive knowledge means we can also advise on where you may be paying too much VAT, as well as discussing any reliefs available to you. 

We have previously assisted businesses with the following: 

  • Ensuring land and property transactions are structured correctly from a VAT perspective 
  • Suggesting changes to land and property transactions in order to secure savings - including VAT savings and Stamp Duty Land Tax savings 
  • Ensuring the transaction achieves its overall commercial objective 

We endeavour to examine all avenues to discover what the best outcome is for our clients and offer advice to ensure they are able to achieve that outcome. 

Liability of supplies

Land or property transactions can be subject to VAT at different rates. Items can be exempt from VAT, attract VAT at a number of rates or be outside the scope of it altogether. While some of these instances may be similar, they have subtle differences, especially when it comes to the recovery of VAT on related expenditure.

Although no VAT is due when a land or property transaction is designated as exempt, the individual making the supply will be unable to recover the related input tax. In contrast, a transaction that is zero-rated for VAT purposes will not be subject to output tax either, although an input tax recovery may be possible.

FAQs

Does roofing material qualify for 5% VAT? 

The Upper Tier Tribunal allowed HMRC’s appeal against the First-tier Tribunal’s decision that conservatory roofs installed by Pinevale Limited qualified for the reduced rate of VAT as “energy-saving materials” amounting to “insulation for roofs”. The work consisted of a polycarbonate cellular material in aluminium frames that comprised the (insulating) roof of the conservatory, and was claimed to provide significant energy savings when compared to other forms of conservatory roofing.

When installed, it replaced the conventional roof on a new or existing conservatory. The First-tier Tribunal decided that this amounted to ‘insulation for roofs’, but the Upper Tribunal disagreed. The Upper Tribunal preferred a narrower interpretation of the VAT relief and agreed with HMRC’s argument that the term ‘insulation for roofs’ did not extend to the roof itself, whatever its insulating qualities.

HMRC’s appeal against the First-tier Tribunal decision was therefore allowed.

Does the supply of goods and services impact land and property transactions?

Land and property transactions can vary depending on whether they involve the supply of goods or a supply of services. The distinction between these is significant, as they determine when the VAT is due. Any property transaction should be defined in this manner from the outset. 

The grant, assignment or surrender of major interest in land or property is classed as the supply of goods, whereas any other land or property-related supply is likely to be regarded as a supply of services. 

The basic tax point for services is when the service has been completed. However, there are special rules for any continuous supplies for specific provisions for construction services supplied under contracts providing for staged payments. 

There are also anti-avoidance measures relating to staged payments, which can have implications for contracts with longer prevention periods. 

Do damp proofing products have the same VAT reduction applied as energy saving materials?

No. HMRC has determined that materials damp proofing products - such as creams, paints
and gels - do not fall under the definition of energy saving materials and as such are liable to
VAT at the standard rate.

This decision was made by HMRC due to the fact these products are ‘applied’ as opposed to
‘installed’, and businesses have been liable to account for VAT at the standard rate on
supplies of these materials from 1st September 2018.

If your business supplies damp proofing products and you are unsure how this brief
impacts you, please call our free VAT helpline for expert advice and we will be happy to
help.

How can I prepare for the reverse charge?

In the event that you or your client operates in the construction sector, please contact us
to discuss the effect that this change may have on your VAT accounting practices.

As of 1st October 2019, businesses involved in supplies of construction services need to
be aware that their services might be liable for the reverse charge. A supplier will still
need to issue VAT invoices, but they should not declare and pay VAT to HMRC. The
customer will become responsible for accounting for VAT by making a reverse charge,
unless they are an ‘end user’ of the services.

We are concerned that many businesses may have overlooked this rule change due to
the wider focus on Marketing Tax Digital (MTD) and Brexit. With this in mind, we have
prepared a helpful and jargon free information sheet. We will be happy to provide this free of
charge to any accountants who may have clients within the construction sector, or to
businesses that supply or receive construction services.

Please call our helpline on 0800 077 4604 and ask to speak to one of our consultants who
will be happy to email a copy of our information sheet to you and discuss any VAT concerns
that you may have.

What is the DIY Builders Scheme?

If you are paying for your own DIY construction work, you may be able to claim back VAT expenses. 

You may be able to claim VAT incurred on materials used in qualifying projects if you are:

●    Building a new home, or converting existing buildings into homes
●    Building non-profit communal properties for charity

Provided that the construction is carried out by a non-business person, you may be able to file a claim. The process must have been carried out lawfully, and the claim must be made by the person responsible within specific time limits.

If you are a DIY builder or converter and require confirmation regarding the application of this scheme, or if you or one of your clients are undertaking work relating to land and property, please call our free VAT helpline to determine the correct VAT liability of these supplies and ensure that VAT is being correctly accounted for.

For example, Mr Smith - sought to convert a barn adjoining his property into additional living accommodation The initial claim made under the DIY Housebuilders Scheme was originally rejected in its entirety, as HMRC considered the barn to be ‘ancillary’ to an existing dwelling. 

However after further review, his decision was subsequently overturned, as they considered that the works undertaken equated to a residential conversion, and therefore were liable to the reduced rate of VAT. HMRC then repaid part of the claim, equating to five percent VAT on supplies considered eligible for the scheme. Therefore, it would be Mr Smith's responsibility to recover incorrectly charged VAT from suppliers.

VAT is only recoverable to the extent it is correctly charged by the supplier, even if a higher rate has actually been invoiced by the supplier. The First-Tier Tribunal concluded that invoices issued prior to September 2006 were correctly charged at the standard rate of VAT, as it was only after this date the building was intended to be a stand-alone conversion. Full VAT recovery was permitted on invoices up to this date, whereas VAT recovery at the five percent rate was only allowed on invoices issued after this date.
 

How we can help

The VAT People can help to ensure your business is paying the right amount of VAT on land or property transactions. Our extensive knowledge means we can also advise on where you may be paying too much VAT, as well as discussing any reliefs available to you.

Contact us by calling 0161 477 6600, or fill out an online contact form and we will be in touch.

Useful Information

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