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Where Taxpayers and Advisers Meet

Company reclaiming VAT

DBass
Posts:2
Joined:Tue Jul 18, 2017 8:27 am
Company reclaiming VAT

Postby DBass » Tue Jul 18, 2017 8:35 am

I have set up a company to run a children's day nursery, therefore it is VAT exempt. However, I have had to spend a huge sum of money refurbishing a leased property to run the business in, and have had to pay full VAT on all the building works, but won't be able to claim the VAT back through my company. Is it legal to ask my builder to refund my nursery company in full, then repay him through a new management company which is not VAT exempt, thereby being able to reclaim the VAT? I know others who have done it but just want to check it's above board before I do it myself. Hope someone can help!
Thanks
Diane

spidersong
Posts:352
Joined:Wed Aug 06, 2008 4:05 pm

Re: Company reclaiming VAT

Postby spidersong » Tue Jul 18, 2017 11:56 am

And what is the management company planning to do in order that it's making a taxable supply with the services it's 'received'?

If it's taking on the head lease and then subletting it to the nursery then any option will be ineffective - so exempt supply, and no VAT recovery.
If it's planning on holding it and not charging rent to the nursery - then it's non-business use, and no VAT recovery.
Is it planning on making taxable management charges to the Nursery, in which case the nursery will still incur the VAT and not be able to recover it.
If it's planning on making nominal fees only and not recovering at market rates then HMRC will attack it as artificial, or a non-business activity and again no recovery.

It also would need a TARDIS as even if you did get the builder to re-invoice that wouldn't change the fact that the actual supply has been made to the Nursery. Presumably the company didn't actually exist when the supplies took place.

If this is a huge sum of money then I'm afraid the right time to look at structuring the deal was before the transactions took place rather than trying to rewrite history in order to avoid paying VAT, HMRC tend to come down particularly harshly on such things.

DBass
Posts:2
Joined:Tue Jul 18, 2017 8:27 am

Re: Company reclaiming VAT

Postby DBass » Tue Jul 18, 2017 12:41 pm

Thanks for the sarcasm - not required. But yes thanks for the help - very useful.


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