VAT refund on property

antoinolachtnai

Is anyone really familiar with the deal where you elect to register for VAT, get a VAT refund when you purchase property, then pay VAT on the rent collected?

I am considering doing this in conjunction with a section 23 purchase. There is other rental income to be taken into account as well.

So question is, when I've paid the VAT man back the 30-odd grand he refunded me at the outset (which will take me about 7 years), will I be allowed to de-register and not have to pay VAT anymore? This is how the schemes I have read about seem to work, but it never says that explicitly.

There is also the issue of whether the refund is worthwhile when I take into account the fact that the section 23 relief is reduced if I elect to register for VAT.

Is there any adviser out there who knows this stuff well? It's obviously pretty complicated.

Antoin.

lomb

i doubt it, i believe when u sell it u will have to charge vat. once a property is vat opted u cannot withdraw that option. tbh its very dubious, i know all about the vat saving and tbh it isnt worth the hassle. ul spend many times that in accounting fees or hassle over the years.
many new apartments are overpriced anyway relative to yield. reclaiming vat isnt really the solution to the problem and is a problem in itself.
also u are going to be a magnat for the taxman, as they dont take lightly to vat fraud, so they do alot of ongoing audits.

antoinolachtnai

Well, there's no hassle, you just file. It's no big deal if you're used to dealing with VAT.

Are you saying that people who engage in the VAT refund schemes are engaging in fraud?

Are you sure of the details on this? It isn't the property that's opted for vat, it's the landlord surely? And there is definitely a way for the individual to opt out of the VAT net, no?

As for the reason for investing in an apartment in this climate, two words - 'tax shield'.

a.

lomb

Seek professional advise from a vat specialist, this is a very complex area.

kluivert

This is an excellent way to save money on the development of rental property, ill explain how it works later on.

First you need to determine the term of the lease, does it classify as a short term or a long term lease.

Ill give you the details later.

antoinolachtnai

Well, it's going to be residential property, so it's going to be a short term lease in tax terms (i.e., 1 year < 10 years).

So go on tell us, what's the skinny on this!?

Jivin Turkey

While I'm open to correction, removal of the property from the VAT net will cause a self supply depending on the term of the lease. You will be liable to VAT on this self supply.

MoneyMagnet

I'm very interested to know how you got along as i am helping a friend to go through this process ad would be keen to pick up any "lessons learned"

Victor

I understood that VAT on property is not recoverable.

antoinolachtnai

This is incorrect. You can, but it may not be advantageous to do so.

kluivert

If you elect to to vat, there is one problem.

When you go to sell the property, you will have to charge Vat on top the cost of the property.

antoinolachtnai

That is a pretty big problem, but there is one other big problem. When you rent out the property, you may have to charge VAT on the rent.

This sort of arrangement works ok for commercial property, but not so well for residential.

kluivert

Yeah you may include VAT on the Rental and then on the sale of the house, IMO its not worth it unless the house needs alot od renovation or as you said its commercial.