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Builders: A Useful VAT Concession In A Recession

Changing from selling to renting your new build ...

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Builders should be aware there is a valuable VAT concession which could save many construction companies from failing during a downturn ...

If you're a builder, you need to know about this important VAT concession!

If you're a builder, you need to know about this important VAT concession!

copyright: maxxyustas / 123rf

Is the housing market about to slow down? In 2008/09, during the last recession, housebuilders were struggling to sell the houses they built and were forced to let them out temporarily instead.

"Letting a new build creates a number of challenges!"

If it's built from the ground up, your new build is zero-rated as long as it is sold with a freehold or a leasehold greater than 20 years in duration (21 years for Scotland). Builders can also claim input VAT on building materials and fees.

Unless the new build is rented out as a holiday let, rental income is usually exempt from VAT. Short-term holiday lets (think Airbnb) are standard rated at 20%, so be careful if you're thinking about how you want to rent it.

The other issue is that the builder claimed the input VAT while building the property, but now they're going to rent it rather than selling it, payback and clawback rules may apply. The VAT is owed in the period the decision to sell was changed to a decision to rent.

But thankfully, the Government in 2008 announced 'transitional' rules that are still in effect even now. Builders could temporarily rent out new builds without having to pay VAT ... in most cases. And this is why the right tax advice is hugely important.

"Would you like to know more?"

If you'd like to find out more about this VAT concession and how it could help your building company survive a downturn or recession, do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.

Until next time ...


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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.