Can I Register My Residential Property Company for VAT?

29/10/2020 by David M Slater

The short answer is that it depends. There is different VAT treatment in property companies depending on the nature of activity being conducted. There are three different VAT rates charged in the UK which a property company may come across:

Standard Rate - 20%

Reduced Rate - 5%

Zero Rate

Property Investment Companies. The letting of residential property is exempt for VAT purposes. This means that you do not charge VAT on your rent but also are unable to recover VAT on expenses.

Serviced Accommodation. If you operate a serviced accommodation business then it is standard rated for VAT. Assuming your turnover exceeds the VAT registration threshold of £85,000 (20/21) you will need to register for VAT. You would then charge VAT on the serviced accommodation you provide but would also be able to recover VAT on expenses. You can still choose to register for VAT even if you do not meet the threshold yet. A number of temporary amendments to VAT were applied to serviced accommodation in 2020 so ensure you seek advice to see whether they remain in play.

Residential Property Development. Sales of new build residential property are zero rated. This means that you do not charge VAT on the property you sell (theoretically you do but it is zero rated) but can still recover VAT on expenses. However be aware that if you use a contractor to build out the new build project then it should be zero rated.

If you develop existing buildings then you are unable to recover VAT on your expenses (VAT exempt) with the exception if the project qualifies as conversion of non-residential property such as a commercial to residential conversion. In this case it is zero rated.

There are some exceptions to these rule so always seek professional advice before embarking on a new venture. Please contact us for a free consultation.

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