This document discusses VAT (value added tax) considerations for buy-to-let investors in the UK. It notes that VAT can significantly impact projects if not properly budgeted and managed. Residential property sales are typically VAT exempt, while rentals are also usually exempt. However, related costs are treated differently for VAT purposes depending on if the income is subject to a 0% or exempt VAT rate. Common problem areas include properly understanding the scope of VAT relief rules and differences in interpretation with HMRC. The document provides an overview of some of the main VAT reliefs available for refurbishing empty homes or converting non-residential to residential properties.

1. VAT
Essentials for Buy-To-Let
Investors

2. VAT: Be Careful Out There
 At 20% VAT can seriously damage your
project’s health!
 Essential to:
 Get it right first time
 Budget for it
 Utilise all available reliefs

3. VAT: Income from residential
property
 1st sale of new dwelling(s) – 0% VAT
 Subsequent sale of dwelling(s) – VAT
EXEMPT
 Rental of dwelling(s) – VAT EXEMPT
 Holiday Accommodation – 20% VAT (if
registered)

4. “Zero” vs “Exempt”
 Income: the same – no VAT chargeable
 Related costs – very different VAT treatment
 Cost relates to 0% sales -> VAT reclaimable
 Cost relates to exempt sales -> VAT not
reclaimable*
*unless within (not very generous!) limits

5. VAT: Common Problem Areas
 Scope of 0%/5% reliefs
 How much VAT can I claim?
 “Educating” suppliers
 HMRC – differences of interpretation

6. VAT payable on costs
“Default position”: 20% VAT* (*if supplier VAT
reg’d)
Reliefs
Refurb of
empty homes
(>2yrs)
5%
Special resi
conversion
/deconversion
5%
Non-resi
converted to
resi
5%
Construction
of new
dwelling(s)
0%

7. Contact
vat@taxadvicedirect.co.uk