Listed Property Show - 20th and 21st February 2010

Once again I am headed off to Olympia in London for the Listed Property Show, for two days of providing one-to-one advice to those who perchance own a listed building. In addition, I will be giving a couple of talks about the riveting subject of VAT, which will doubtless provoke interest, boredom, or even sleep in equal measure amongst the audience. If you wish to enjoy the other delights on show please do not be put off by the VAT angle. It is an interesting show, including talks, demonstrations and displays by craftsmen and others with a particular interest in listed buildings - and it's free!

www.davebrownvat.com

VAT changes - Pre-Budget Report

Once again, changes announced by HMRC left me totally unmoved, as they announced the proposed changes some months ago. In short:

A revised electronic means of reclaiming VAT incurred in other EU countries.

Changes to the "time of supply" rules for intra-EU supplies.

Changes to the "place of supply" rules for intra-EU supplies of services.

Introduction of EC Sales Lists for intra-EU supplies of services - hitherto only required for supplies of goods.

If you consider that you might be affected by any of these changes, please ask.

Intrastat Changes

There is a reasonably good chance that you will not have heard the expression "Intrastat", let alone know what to do with it! In short, the EU demand that each Member State collects statistical information on trade going between Member States. For certain levels of trade, this is collected using the "intrastat" procedure. Hitherto, the level for both sales ('dispatches') and purchases ('arrivals') was £270,000 annually. The levels are now changing, from 1 January 2010 to £600,000 for arrivals and £250,000 for dispatches. If your sales or purchases exceed those levels, you are then roped into the system with no chance of escape - well, not for a while anyway. Please contact me if you need a more detailed explanation.

www.davebrownvat.co.uk

Guidance published for letting of new domestic properties

The downturn in the property world has various effects. Not only are properties failing to sell, but there is a hidden sting in the tail. The reason for this is that when a developer constructs a new house for sale, he is entitled to reclaim the VAT that has been spent out on materials. If the new house cannot be sold, the developer might be tempted to let the property on a short-time basis – say, on an assured short-hold tenancy. Therein lies a bit of a problem, as the ability to reclaim VAT on expenditure depends on there being a freehold sale at the end of it, or else a leasehold sale exceeding 21 years. Letting of property is exempt from VAT, which means that the VAT on the expenditure is not, in principle, claimable.

So if you sell the house, you can claim the VAT; if you let it, you can’t. That could perhaps be regarded as rubbing salt into a wound. However, thanks to a High Court case some sixteen years ago, HMRC were forced to admit that developers should be able to reclaim the majority of the VAT on costs, with a potential disallowance proportionate to the length of time the property remains let.

In the current climate, HMRC have re-issued their guidance in the shape of an Information Sheet, as below, which gives reasonably clear guidance on what developers ought to be doing now, if they choose to let rather than sell, albeit on a temporary basis. The guidance also covers the situation where they are currently letting properties, without having made any earlier adjustment for this problem.

I won’t bother re-printing the entire guidance as I am sure that you are quite capable of reading it for yourself. What I would say, though, is that expert assistance might be useful – anyone who has had to deal with partial exemption will be aware that it can involve highly complex calculations.


VAT Information Sheet 07/08
September 2008