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Housebuilders face extra tax on rents
brit1234
Posts: 5,385 Forumite
Housebuilders face extra tax on rents
By Vanessa Houlder
Published: September 24 2008
Housebuilders face extra tax bills if they rent out new homes they have been unable to sell, according to official advice that will add to pressures on the sector.
Property developers could be forced to repay value-added tax they have already claimed back because of differing VAT treatment of selling and letting properties, according to advice published by Revenue & Customs.
Alex O’Connor of McGrigors, the professional services group, said the tax implications of putting unsold properties on the rental market were likely to come as a shock to some builders.
“Housebuilders are already under severe financial strain as the price of newly built properties plummets and stock remains on the market,” he said.
“The only option in many cases will be to rent, but having to repay VAT could cause severe cash-flow problems and in some cases even bankruptcy.”
Revenue officials say many housebuilders will not be affected because there are special rules allowing them to ignore small amounts of “exempt input tax” relating to temporary lets.
Mr O’Connor said some housebuilders might be able to get round the VAT rules by selling their buildings to a letting subsidiary.
He also urged Revenue & Customs to make special provision for recovering VAT from housebuilders in financial difficulty.
Some businesses would be liable for repayments to the Revenue before they received any rental income, as the trigger for repayments was the “intention” to rent, he pointed out.
http://www.ft.com/cms/s/0/2e5902d2-89c7-11dd-8371-0000779fd18c.html
By Vanessa Houlder
Published: September 24 2008
Housebuilders face extra tax bills if they rent out new homes they have been unable to sell, according to official advice that will add to pressures on the sector.
Property developers could be forced to repay value-added tax they have already claimed back because of differing VAT treatment of selling and letting properties, according to advice published by Revenue & Customs.
Alex O’Connor of McGrigors, the professional services group, said the tax implications of putting unsold properties on the rental market were likely to come as a shock to some builders.
“Housebuilders are already under severe financial strain as the price of newly built properties plummets and stock remains on the market,” he said.
“The only option in many cases will be to rent, but having to repay VAT could cause severe cash-flow problems and in some cases even bankruptcy.”
Revenue officials say many housebuilders will not be affected because there are special rules allowing them to ignore small amounts of “exempt input tax” relating to temporary lets.
Mr O’Connor said some housebuilders might be able to get round the VAT rules by selling their buildings to a letting subsidiary.
He also urged Revenue & Customs to make special provision for recovering VAT from housebuilders in financial difficulty.
Some businesses would be liable for repayments to the Revenue before they received any rental income, as the trigger for repayments was the “intention” to rent, he pointed out.
http://www.ft.com/cms/s/0/2e5902d2-89c7-11dd-8371-0000779fd18c.html
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Comments
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surely most house builders will have a developing company and a building company and therefore there won't be any VAT to repay as it will be the developing company renting the properties out and the building company reclaiming VAT in the first place i.e. two separate companies ?
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