Zero Rating VAT on New Build?

[Alisonnn]

Hi, please can someone advise me whether or not i can instruct a building firm to build 4 flats on some land i own and have them invoice me with zero rate VAT? (existing building is to be totally demolished before commencement of new build).

More importantly will i be able to retain these 4 flats and rent them out and still be able to qualify for the zero rating VAT or am i subject to am element of VAT?

Your advise is much appreciated!
Alisonnn

[spidersong]

If you've got a builder providing construction services in the course of building new dwellings then they will zero rate their services, what you do with the buildings afterwards doesn't affect their charges to you.

Any VAT you incur on professional services or on any materials you provide yourself will have VAT on them and be non-recoverable.

If part of a single project you can also have the demolition zero rated as part of the preparatory work for the construction of new dwellings.

[Alisonnn]

Thank you spidersong,
That seems to clear up the doubt i had.
But i was under the impression that when the project was started your intension to build and retain was different to build and sell in some way?
Possibly to do with the VAT?
ie Investor or Developer
Kind regards Alisonnn

[spidersong]

The build retain / build sell problem occurs where you're registered for VAT and constructing yourself.

Selling new dwellings is zero rated and thus taxable (although at a nil rate), and when making taxable supplies you can recover VAT you incur, so if you do your own building you can claim back the VAT on bricks/mortar/professional fees etc.

Letting is exempt and you cannot recover the VAT in the course of making an exempt supply so you're stuck with the VAT on bricks/mortar etc.

So if you try to register for VAT adn do it yourself you'll be refused if you'll be letting. However for a contractor, they're just selling their services, and as mentioned before if constructing dwellings for whoever they will zero rate those services (and any materials supplied in the course of making those services) [under Schedule 8, Group 5, Items 2 and 4 of the VAT Act 1994]

[Alisonnn]

Thanks so much for all the information!

But just so i am completely clear in my head is this correct: -

I can instruct a builder to build my 4 flats who will invoice me with a VAT zero rating, and other bills such as professional services or materials i supply, i will have to suffer the VAT. Then i can go about letting the flats out and retain ownership?

Please confirm if i have understood you correctly, if not please spell it out, thanks again.
Alisonnn

[spidersong]

Yes that's right - good luck with it all.

[bluemoney]

hi, can you clarify, i am a builder and quoting for a new build at zero rate vat. can i claim back building material vat (currently 17.5%)??

[Alisonnn]

Hi,
Yes that is correct, you will buy materials and pay the vat but then claim it back in your quarterly vat returns, and then bill your customer with zero rate vat.

[duncanb79]

The build retain / build sell problem occurs where you're registered for VAT and constructing yourself.

Selling new dwellings is zero rated and thus taxable (although at a nil rate), and when making taxable supplies you can recover VAT you incur, so if you do your own building you can claim back the VAT on bricks/mortar/professional fees etc.

Regarding the above, any advice on my situation would be greatly appreciated. I thought I had it sorted, but it now looks like I may be wrong....

My business parter (a VAT registered contractor) and I are about to begin construction of a pair of semi-detached houses which we will sell on completion. We each personally own 50% of the plot, and have each personally contributed 50% of costs incurred so far. These have almost entirely consisted of planning and professional fees, building warrantees and connection fees to utility companies. We have a joint bank account into which we each transfer equal sums to cover upcoming costs. We plan to continue funding the build 50/50

I have always thought that his company will be able to bill us as individuals for the works at a zero rate of VAT and that he would reclaim the VAT through his quarterly returns. Is this correct, and is this the most efficient way of arranging this project?

The quoted post says that when doing your own building you can claim back professional fees. Is this the case? I had assumed we would have to pay the VAT on these. Perhaps I should be 'lending' him the money on a profit share basis?

I should probably say that so far, the invoices paid have been made out in a combination of his name/my name/both names. I'd be grateful for advice on how this might effect things.

Cheers.

[Generix]

The build retain / build sell problem occurs where you're registered for VAT and constructing yourself.

Selling new dwellings is zero rated and thus taxable (although at a nil rate), and when making taxable supplies you can recover VAT you incur, so if you do your own building you can claim back the VAT on bricks/mortar/professional fees etc.

Regarding the above, any advice on my situation would be greatly appreciated. I thought I had it sorted, but it now looks like I may be wrong....

My business parter (a VAT registered contractor) and I are about to begin construction of a pair of semi-detached houses which we will sell on completion. We each personally own 50% of the plot, and have each personally contributed 50% of costs incurred so far. These have almost entirely consisted of planning and professional fees, building warrantees and connection fees to utility companies. We have a joint bank account into which we each transfer equal sums to cover upcoming costs. We plan to continue funding the build 50/50

I have always thought that his company will be able to bill us as individuals for the works at a zero rate of VAT and that he would reclaim the VAT through his quarterly returns. Is this correct, and is this the most efficient way of arranging this project?

The quoted post says that when doing your own building you can claim back professional fees. Is this the case? I had assumed we would have to pay the VAT on these. Perhaps I should be 'lending' him the money on a profit share basis?

I should probably say that so far, the invoices paid have been made out in a combination of his name/my name/both names. I'd be grateful for advice on how this might effect things.

Cheers.

I have to admit I only skim read this - and there are (much) better people on this forum for such Q's;

However my take on it would be the easiest thing to do would be to do the project either as a partnership or a joint venture company. Get that business VAT registered etc. would probably have other tax savings too - although again, other people would be able to better advise.