BTL should attract VAT

Graham_Devon

FTBFun wrote: »

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.

Well at that point, it's up to the private individual to choose whether they want to pay the increased price asked by the landlord to cover his taxes. Otherwise, the landlord is restricted to either selling to another landlord, or marketing it at a "normal" price and swallowing the tax bill (as the case would be with most windups after claiming back VAT).

It's likely they wouldn't. I can't see any other reason bar the house being absolutely perfect for the residential buyer that they would.

chewmylegoff

Graham_Devon wrote: »

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.

Making rent 20% more expensive along the way. I think I'll stick with my amateur landlady thanks.

Also, what happens if you buy a house, live in it, then later decide to rent it out? Any VAT on that?

Loopgames

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?

In the case of the van man, he failed in accounting for the vat in the sale price. When i sell any product i dont 'keep' the 20%, i have to give it the tax man. So he failed to remember to allow for his cost to taxman. Businesses dont fold because of vat being a chunk paid to hmrc, they fail because they don't account for expenses not to mention supply and demand factors.

Back to property. If a houses were to have vat imposed. They would be reclassified as commercial property. And in the uk commercial property has vat added. So again providing less property for comsumers.

Loopgames

Found something about this on a londlord forum

http://www.landlordzone.co.uk/forums/showthread.php?1749-VAT-on-Commercial-property

Graham_Devon

Loopgames wrote: »

So again providing less property for comsumers.

Or providing more, as less landlords take them on due to increased accounting? It becomes a proper business, not just an investment if you see what I mean.

Thanks all anyway, everything said makes sense, and I think, in some roundabout way, it would achieve the intentions set out...

However, there has got to be a multitude of ways to do it in a better way.

Graham_Devon

chewmylegoff wrote: »

Making rent 20% more expensive along the way. I think I'll stick with my amateur landlady thanks.

Also, what happens if you buy a house, live in it, then later decide to rent it out? Any VAT on that?

As I stated, why would any business mark their products up 20% more than their competitors over the road?

This "they would just increase rents 20%" may well be true. But I can't see it making business sense if they want to rent their place out. It goes back to the competition mentioned earlier.

Graham_Devon

socrates wrote: »

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!

Well to be fair, you are probably exactly the person he is describing, so I guess no love lost there!

chewmylegoff

Graham_Devon wrote: »

As I stated, why would any business mark their products up 20% more than their competitors over the road?

This "they would just increase rents 20%" may well be true. But I can't see it making business sense if they want to rent their place out. It goes back to the competition mentioned earlier.

Because they need to make a profit, so if they suddenly have to give 1/6th of their income to the govt, they will have to put their prices up to compensate or go out of business.

chewmylegoff

Graham_Devon wrote: »

Or providing more, as less landlords take them on due to increased accounting? It becomes a proper business, not just an investment if you see what I mean.

Thanks all anyway, everything said makes sense, and I think, in some roundabout way, it would achieve the intentions set out...

However, there has got to be a multitude of ways to do it in a better way.

Why does charging VAT make it a real business? By that logic banks are not real businesses as they are not VAT registered!

FTBFun

Tesco's aren't a proper business either then, as they don't charge VAT on their food.