Claiming VAT back

[Tee11]

Hi I was wondering if anyone could help - we set up a Ltd company last year to run our property portfolio and since then a couple of people have mentioned to me that I should get VAT registered as you can claim VAT back on property maintenance.....??

but whenever I call the VAT office to talk to them about it, they say since we do not charge VAT on the rental income we can not claim it back? Is this correct, or am I missing something....?

Thanks

Tee

[vin]

The Rent is not vatable, however depends on how you spend over the 12 month on materials. You may well be able to claim that back.

However, I would suggest you really have to consider if its worth the hassle, since you have to do a quarterly return. VAT is claimable on conversions over shops i seem to recall, with out being registered.

Even setting up a LTD company for a small portfolio is not totally recommended, it sounds great, but no real benefit IMHO.

If so lots of Landlords would have done it.

[Tee11]

Thanks for your note -I assume than that most landlords run their business as 'sole traders' or not as a business?

We did do some rentals and some developments just in our own names and paid tax as capital gains, but were advised to set up a company after a couple of years as the tax man would see that we were 'trading' a limited company seemed to be the best option at the time, but I now have my doubts since corporation tax went up! Although it does make it easier to keep the books separate to our own affairs.

But claiming VAT back would help the bottom line, but I just cannot get clarity from anywhere on how I go about claiming it back. The VAT office just say no. But other landlords yes 'in passing' you can, but just don’t say how!

Tee

[hmy7k]

Residential lettings are exempt from VAT and therefore you cannot reclaim any VAT on expenses.

However there are situations where you can reclaim VAT in particular if you create new dwellings i.e conversions or where you rent commercial property which has been elected to charge VAT.

If you provide more information on what income sources you have and what types of development you do I can give you some clearer advice.

[Tee11]

Hi hmy7k

Ok thanks - Our most recent project consisted of us taking a run down 8 bedroomed house and converting it into two 4 bedroomed houses. So we did create a new dwelling in terms of address, but in terms of size the orginal house was cut in two. Both are now completely refurburbished to a very high standard and let.

Any help would be much appricated.

Thanks

Tee

[hmy7k]

You cannot reclaim VAT in these circumstances but the conversion of a single dwelling into a different number of dwellings qualifies for VAT to be charged at the reduced rate of 5%. Your builder should be able to do this for you.


Before you do your next project you should read VAT notice 708 Buildings & Construction as this will give you the circumstances where different rates of VAT are charged.

Hope this helps.

[Tee11]

Hi

Thank you - you have been most helpful.


Regards

Tee

[nstark15@hotmail.com]

Hi, I am not an accountant, I saw you post and thought I would share some of my limited Knowledge wiith you.

In short, yes you can still claim the VAT back, Just because you rental income is exempt, does not mean that you cannot get it back.

Here is my situation and how I have solved the problem.

I am a landlord and developer. I wanted to do the same as you and claim my VAT back, spoke to a few accountants that said no, and then managed to get the write one.

I setup a Ltd co. on a development and all property related, I carry out work for myself and my own properties, with this you would have to charge yourself a corporate rate of tax which I beieve is now 22%, however you would only have to charge this to yourself if the company was in profit. So you transfer some money to the Ltd company and write them in as Directors loans for the company, no money has to change over for this it is literally just a paper excersise. Ones this is done, the company will not make profit until this directors loans are paid, you could always just increase this later on. So if you do this and you are not making any profit, you will not be liable for corporation tax and you will be able to claim VAT back.

My other note is that this 8 bedroom property you converted to a 4 bedroom may be zero rated and be able to claim back VAT without registering, you would have to check this out on HMRC website, but if this was a commercial property it may be possible, I know if you convert commercial into flats it is Zero rated but into one unit I am not sure, you can lso claim VAT back without being registered for renovating a property that has not been lived in for 2 years or if it is a selfbuild property, as far as I am aware this has not hanged, but you do not always have to charge VAT to be VAT registered.

I hope this is useful, this took me weeks of research into, If you need anything else and the accountant who is very good number please let me know.