BTL should attract VAT

FTBFun

But Graham - what if the BTL property is being sold to a private individual as an owner-occupier? That would have to be VATable as well as the new owner will have no chance of recovering the VAT.

If anything, it looks like this idea will restrict supply if anything.

Graham_Devon

chewmylegoff wrote: »

Yeah that's right. So when they sell the house it will make the house 20% more expensive for someone to buy unless they are a VAT registered BTL - another interesting consequence...

Why would it?

Ex company vans are no more expensive for me to buy than it is to buy a privately owned van? They don't just whack 20% onto the price for a private buyer. It's the same price as another van (allbeit marked at a lower price and stating "subject to VAT"). Still ends up at the same roundabout price to any other van.

Why would it make houses more expensive for me to buy?

Again, I'm just putting 2&2 together...probably coming up with 6, but you aren't exactly explaining yourself very well, just coming up with obstacles and saying "yer, well done Graham"....but I don't see these obstacles whereever else I look to buy ex company items as a private buyer?

If there were 2 identical houses up for sale nextdoor to each other, why would one be marketed at 100k as it's a private home, and the other marketed at 120k, as it was a BTL? It wouldn't happen, and doesn't in any other scenario, that I'm aware of.

Loopgames

Business is a psychological game. The vat issue is actually really easy but people 'think' it is difficult so yeah, amateur btl will be put off due to the mental block they have about vat etc even though ot os really simple and not a burden at all. If anything the first few months you will be quids in due to all the expenses you make resulting in a vat refund in the thousands depending how much work in a property you make.

Loopgames

Graham_Devon wrote: »

Why would it?

Ex company vans are no more expensive for me to buy than it is to buy a privately owned van? They don't just whack 20% onto the price for a private buyer. It's the same price as another van (allbeit marked at a lower price and stating "subject to VAT"). Still ends up at the same roundabout price to any other van.

Why would it make houses more expensive for me to buy?

Again, I'm just putting 2&2 together...probably coming up with 6, but you aren't exactly explaining yourself very well, just coming up with obstacles and saying "yer, well done Graham"....but I don't see these obstacles whereever else I look to buy ex company items as a private buyer?

That is because all vehicles have vat imposed on them for both consumers and business people. That is why you dont notice the price differential in the price of vans as a consumer.

All vehicles have vat added and no property does.

If you impose a discriminatory price differential at the BEGGINING of a purchase then you shouldn't be surprised if it ends with a price differential at the END life of the same purchase.

Loopgames

I reckon that you will see a new brand of description noted at the top of each property for sale:

ATTENTION VAT REGISTERED INVETORS ONLY

Graham_Devon

Loopgames wrote: »

That is because all vehicles have vat imposed on them for both consumers and business people. That is why you dont notice the price differential in the price of vans as a consumer.

All vehicles have vat added and no property does.

If you impose a discriminatory price differential at the BEGGINING of a purchase then you shouldn't be surprised if it ends with a price differential at the END life of the same purchase.

Ahh ok.

But in my mates scenerio, he sells his van at the market rate and ends up owing the VAT man as he claimed back VAT at the purchase end.....

He can't just sell it for X% more to cover the tax he owes, as no one would buy it.

Therefore in the housing arena, surely houses couldn't just be sold at 20% more to cover the existing owners tax liabilities? Again...why would anyone buy it?

If landlords put their rent up 20% to cover their new buys, why would anyone rent there when they can rent 20% cheaper down the road?

It's all relative, and when it comes to BTL costs, it's always assumed you'd just pile it on the consumer...but that's not always the case. Surely?

chewmylegoff

Graham_Devon wrote: »

Why would it?

Ex company vans are no more expensive for me to buy than it is to buy a privately owned van? They don't just whack 20% onto the price for a private buyer. It's the same price as another van (allbeit marked at a lower price and stating "subject to VAT"). Still ends up at the same roundabout price to any other van.

Why would it make houses more expensive for me to buy?

Again, I'm just putting 2&2 together...probably coming up with 6, but you aren't exactly explaining yourself very well, just coming up with obstacles and saying "yer, well done Graham"....but I don't see these obstacles whereever else I look to buy ex company items as a private buyer?

If there were 2 identical houses up for sale nextdoor to each other, why would one be marketed at 100k as it's a private home, and the other marketed at 120k, as it was a BTL? It wouldn't happen, and doesn't in any other scenario, that I'm aware of.

In your scenario both houses would appear to be £120k to a BTL buyer. Basically once a house had been bought by a LL and become VAT registered it would circulate within the VAT registered BTL community. There is a practical precendent to this - commercial property. You can elect to VAT register commercial property. If you do so then you have to charge VAT on the rent and charge VAT when you sell the building. This means that businesses which cannot reclaim the VAT will not touch the property with a barge pole as it is 20% more expensive to them.

Anyway this wouldn't work in practice as who is going to collect the VAT and pay it over? If you, as a private individual, sold your house to a BTL, you cannot legally invoice them for VAT as you are not a VAT registered person.

socrates

Whoever your relative is he sounds like an idiot

Why do I care what it says in the press or what people think if I am a LL

Do these people pay my bills?

All I know is when I retire I will have a number of properties mortgage free and a nice steady income - 'they' can all say and think exactly what they want!

chewmylegoff

Graham_Devon wrote: »

Ahh ok.

But in my mates scenerio, he sells his van at the market rate and ends up owing the VAT man as he claimed back VAT at the purchase end.....

He can't just sell it for X% more to cover the tax he owes, as no one would buy it.

Therefore in the housing arena, surely houses couldn't just be sold at 20% more to cover the existing owners tax liabilities? Again...why would anyone buy it?

If landlords put their rent up 20% to cover their new buys, why would anyone rent there when they can rent 20% cheaper down the road?

It's all relative, and when it comes to BTL costs, it's always assumed you'd just pile it on the consumer...but that's not always the case. Surely?

Why would anyone buy it? To a BTL it is not 20% more expensive as they can reclaim the VAT.

Graham_Devon

chewmylegoff wrote: »

In your scenario both houses would appear to be £120k to a BTL buyer. Basically once a house had been bought by a LL and become VAT registered it would circulate within the VAT registered BTL community. There is a practical precendent to this - commercial property. You can elect to VAT register commercial property. If you do so then you have to charge VAT on the rent and charge VAT when you sell the building. This means that businesses which cannot reclaim the VAT will not touch the property with a barge pole as it is 20% more expensive to them.

Well that would actually do exactly what my cousins intentions were. Limit the "chancers" as it would limit the potential to easily sell at a later date, as the pool of buyers is restricted.

So in a roundabout way, it's achieved the intentions laid out at the start.