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Where Taxpayers and Advisers Meet

deisgn and build contracts

Nonimous
Posts:90
Joined:Thu Jul 16, 2009 12:39 pm
deisgn and build contracts

Postby Nonimous » Fri Feb 09, 2018 1:17 pm

Client (who is a property developer) has planning permission to build 3 properties but wants to let rather than sell. Am assuming lease is under 20 years

Client is aware that residential property lets are exempt thus any VAT due on construction will be irrecoverable.

My initial thought would be to get them constructed on a design and build contract thus professional fees would follow the general liability. However, I have heard that HMRC were attacking this - any thoughts?

Only other thing I can think of is that builder builds and then client buys. Ciient pays no VAT, builder gets it all back.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: deisgn and build contracts

Postby pawncob » Fri Feb 09, 2018 4:13 pm

Set up a LTD for the development and then sell to the client.
With a pinch of salt take what I say, but don't exceed your RDA

Nonimous
Posts:90
Joined:Thu Jul 16, 2009 12:39 pm

Re: deisgn and build contracts

Postby Nonimous » Fri Feb 09, 2018 5:13 pm

yes that would work, is there anything to watch out for other than SDLT?

davebrownvat
Posts:60
Joined:Mon Jul 20, 2009 4:37 pm

Re: deisgn and build contracts

Postby davebrownvat » Tue Feb 20, 2018 1:41 pm

Set up a LTD for the development and then sell to the client.
Surely that would trigger a corporate tax liability for the sale of the properties?

Why not just set up a separate company to be the main contractor - zero rated build, and do a formal design & build contract to boot? I'm not aware of HMRC targeting this arrangement, but if worse comes to worse, you'll still be no worse off than if you didn't do it. Notice 708 (online, today) shows d&b as zero rated, so if an attack was made, I can't see how it could work - and certainly following HMRC guidance is likely to be an acceptable excuse against a penalty.


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