Whether you’re a commercial developer, house-builder, investor, landlord or tenant, just about every business in the UK has some involvement in property.
VAT and property issues are among the most complex and potentially the most costly. And once you’ve done the deal, you can’t go back and change things to avoid an unforeseen VAT cost.
Anyone who is in the property business appreciates the complexity of the VAT and property rules. But businesses in any sector – for example a retailer or manufacturer or service supplier with occasional property transactions – can find themselves dealing with very messy issues and unexpected VAT bills. Even relatively small value transactions can be messy and take ages to sort out.
The best way to minimise costs and avoid problems is to consider the VAT implications of any proposed transaction during the planning stage when it is possible to identify potential problems and consider viable alternatives.
There is a lot of information about VAT and property and people often don’t know where to start looking for information that can help with their particular query.
So why can’t you just do a simple guide?
I’m often asked why I don’t write a “simple” guide about VAT and property, such as a table or decision tree to help make things easier. There are very good reasons for this:
- First of all, there are just too many rules. Even listing the main rules on specific subjects; for example the rules for house-builders or the option to tax; can end up running to several pages long and still end up omitting many important details.
- The potential cost of getting it wrong is too high and in most cases it simply isn’t possible to get rid of the VAT cost once the transaction is put in motion.
- And finally, any such guide would only be reliable if the person using it understood all of the principles and terminology involved. To give just one example, the term “capital expenditure” has a different meaning as far as VAT, Corporation Tax and accounting are concerned.
Even with all my years of experience, I rarely give an on the spot response to a query about VAT and property because I have to be certain that I’ve considered all of the possible angles.
And finally, this is the most important piece of advice I can give any business:
You might think that paying for VAT advice is a luxury you can’t afford. However, if you ARE able to invest money on specialist VAT advice, the most cost effective way of spending it is when you’re planning a property transaction. Get the advice at the planning stage before anything is signed or agreed with contractors or before you spend money or sign a contract to purchase property. The cost of getting it wrong could be significantly more expensive than the cost of a few hours of a consultants’ time.