VAT Compliance
VAT is designed to be a tax on the final consumer, however this does not mean that businesses are always in a position to recover all of the VAT they incur. With the new HMRC penalty regime it could be a costly mistake with the penalties being up to 100% of the tax unless it can be demonstrated that 'reasonable care' has been taken.
We have a long history in dealing with land and property VAT related matters. The most common issues we come across are:
Partial exemption
VAT is not recoverable against exempt supplies however in a business with mixed outputs of say, crop sales and rental income then a de minimis test can be applied to maximise VAT recovery.
Option to tax
One option available to partially exempt businesses is to 'opt to tax' land and buildings. This converts an exempt supply to taxable supply. This does not apply to residential properties.
Repairs/Improvements/new builds
In some cases VAT can be reduced to either 5% or zero rated depending on the type of work and the type of property.
Place of supply of services
From 1 January 2010 the new basic rule for the supply of services for business to business (B2B) supplies is the place where the customer is established and no longer the place where the supplier is established.
Land related services are currently deemed to be supplied where the land is situated. This will remain unchanged.
For more information on any of these area please visit bidwellsaccounts.co.uk
