Monitoring your VAT position with changes of intention and use of property

The VAT rules in relation to land and property transactions are complex, and the requirement to consider VAT does not always end after a transaction has been completed. 

Also, where initial intentions regarding the use of property change, this will have VAT implications, which in some cases, can extend beyond the normal four year time limit. For example, if a business recovers VAT based on an original intention to develop and sell zero rated residential property, but later changes its intentions so that it will make long term exempt rentals of the property instead, this can result in VAT clawback adjustments to HMRC when this change in intention occurs, and can go back six years.

It is important for businesses that own interests in property, or are involved in property transactions to ensure that they are fully aware of the VAT implications and that they monitor the ongoing use of those properties. This will ensure that any associated VAT costs are factored into financial budgeting calculations and do not result in unexpected VAT surprises.

If you own interests in property or are involved in property transactions, and wish to discuss your own VAT position, please contact your usual VAT contact, or please contact us.  

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