A mixture of VAT, CGT and CIL questions

[WhiteRabbit]

Hi All

 

We acquired a property that was part commercial and part residential and subsequently had permission to change use to full residential on all parts of the property. We are planning on renovating the whole property to live in as one family house for 10 years or so. We are also considering using part of the property as an ad hoc airbnb style rental over the course of those 10 years or perhaps as a normal long term rental property if the airbnb model becomes too arduous.

 

Now we're busy trying to work out the most efficient way of conducting the reno so we pay as little tax as possible over the course of the process but also have a keen eye on minimising any CGT we may become liable for when we final come to sell. The property itself will likely double in value from the initial purchase price due to the extensive renovations we are planning so if CGT becomes due it might wipe out any potential profit from renting out any part of it.

 

My questions are these..

 

The reno should qualify for 5% VAT rate due to the building having stood empty for more than 2 years but as I plan to do a lot of the work myself I see that claiming back the VAT on materials will be either difficult or not possible at all. I do, however, have a VAT registered Ltd company myself (IT services though and not construction) so would it be possible for that company to become my contractor and supply the materials, and hire me out to do the fit thereby enabling me to claim the 15% VAT back? Is this a possibility? Or is there a better way?

 

The other main concern is CGT. Is there any way to avoid falling into a CGT trap whereby the end profit made will become liable for tax because a part of the house has been used as a rental property?

 

The CIL I think I have a handle on as we have been told that if we live in the property for 3 years we will be exempt but is there any danger given the above scenario that we might find ourselves liable?

 

Lastly, and failing any clear cut answers to the above can anyone reccomend any property tax advisers that might be able to work with me on this?

 

Many thanks!

[nod]

If you use your LTD company 

It will effect your Cil exception 

I also run a LTD company and had to open personal account with Builders merchants To run along side those I already have 

[newhome]

First of all you need to read the following to ensure that you retain the ability to pay 5% VAT on any work done by VAT registered builders. This is from VAT notice 708. 
 

 

I don’t believe that you can use your Ltd company to put through purchase of building materials through for the following reasons:

 

You would have to pay the going rate for work done through a Ltd company that would need to be put through as income on which you would be charged Corporation Tax. If you are talking about charging the going rate through your company this might be a possibility. 
 

If you do the work for free or almost free, and only repay the cost of materials this isn’t legal as you are not then buying the materials for the business. A ltd company can’t be used as a halfway house to avoid paying VAT. If there were a sudden increase in purchases without a corresponding increase in sales this may appear suspicious and could leave you open to an inspection which would be very tricky to negotiate. They have 6 years to open a case so this approach is not recommended and no sane accountant would advise you to do this. For an IT company to suddenly start building transactions might be a bit suspicious. You definitely need professional advice on this. 
 

 

 

[keith65]

If you rent out part of the property your Cil would become due as it has to be your home 

[WhiteRabbit]

Thanks all.

 

Confirmation, I think, that I need to get professional advice.

 

The irony, as always, with professional advice is that you have to educate yourself enough in the discipline in question to be able to ask the right questions and to properly understand the advice you receive.