Value added tax (VAT) is commonly applied to goods and services. For example, a company will charge the customer VAT but then claim it back from the government via p...
Value added tax (VAT) is commonly applied to goods and services. For example, a company will charge the customer VAT but then claim it back from the government via purchases. It means that the government gets the money quickly and that the admin is done by the business owner themselves.
There are different types of VAT that can be applied to sales in the UK, such as
and
Most VAT is collected by applying the
which is currently 20%. The
is when businesses don’t add VAT to sales, but can still recover it on purchases. A book shop or an export business would be in this category. The
affects property conversions, as well as fuel and utilities. You apply 5% to sales and recover VAT on purchases.
Another form of tax is
This doesn’t mean that there is no VAT applied, rather that there is none on sales and you can’t recover it all on all your costs.
Selling or renting out a property as a buy to let doesn’t allow you to charge VAT on the ‘sale’. However, you can recover VAT on items or services relevant to the property. This would come under exempt supplies.
A new build home for which the freehold is sold would be
That’s because it’s possible to claim VAT back on the costs of constructing it (provided you didn’t use a third-party builder). You can also claim VAT on architect’s fees.
such as a barn or office into residential property is less straightforward than residential, when it comes to applying VAT. That’s because it depends on how that property was taxed in the past. There’s also the matter of construction, which should be at a
of VAT.
is
by default, such as when it comes under the
rule. This involves charging VAT on all supplies of that commercial properties for at least a couple of decades, allowing landlords to then recover it (provided the building isn’t let to a charity or used for residential purposes). HMRC must be notified of a landlord’s intention to charge VAT though, since the option isn’t automatically transferable on the purchase of a building.
This is another area and involves a new landlord taking over from an existing business which had
and where the business has current tenants or an existing lease. In this instance, where the tenants would be staying, there would be no need to charge VAT on the purchase.
Commercial property is regarded as new in tax terms when it is less than three years old. In this instance, the buyer would likely
at the standard VAT rate in order to recover the VAT he or she has already paid on purchase. They would then charge VAT on rent if and when they finally came to sell it themselves (if not ‘a going concern’).
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