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Can I set up a property management company to reclaim the VAT

26 replies

KatyMac · 04/04/2008 12:23

So my nursery can borrow money
But would have to pay VAT on the build cost

So can I set up a property Management company - then the co-op lend the PM co the money, claim the VAT back on the build & charge the co-op rent?

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NotQuiteCockney · 04/04/2008 12:50

You don't pay VAT on builds, I thought? New builds have no VAT, renovations pay VAT.

Anyway, the property management company would have to be VAT-registered to do this, but do we pay VAT on rent? I didn't think so ...

KatyMac · 04/04/2008 13:23

It's a conversion

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claricebeansmum · 04/04/2008 13:25

But the property management company would have to pay the VAT..

Anyway a conversion attracts VAT. PITA.

NotQuiteCockney · 04/04/2008 13:27

I don't think this would work, just on the general principle that, well, if it worked everyone would do it and evade the VAT, right?

Nurseries can't register for VAT, so you can't claim the VAT back. Is that right?

NotQuiteCockney · 04/04/2008 13:35

Ok. I've been reading the conditions for zero-rating. New builds (and conversions, for that matter) are only zero-rated if they're residential. Which includes old age homes, but not nurseries.

However, it does include charitable purposes. Which includes "as a village hall or similarly in providing social or recreational facilities for a local community."

The nursery my DS2 goes to is a village hall of sorts, in the evenings, available for birthday parties etc etc. Any chance you could have some of your nursery space available for this?

Oh, arse, but it does say "a building designed as a dwelling or number of dwellings or intended for use solely for a relevant residential purpose or a relevant charitable purpose; " And the nursery won't be solely for that.

You do need an actual accountant, really.

KatyMac · 04/04/2008 14:36

I know - I think I do

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KatyMac · 04/04/2008 17:11

We are a co-op which is a social enterprise not a charity

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NotQuiteCockney · 04/04/2008 21:30

Yeah, I don't think any charity's building gets zero rated, I think it's only some charitable purposes ...

KatyMac · 04/04/2008 21:44

I don't think I want it to be zero-rated - just to be able to claim the VAT back

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ChirpyGirl · 04/04/2008 22:42

OOh, this is a well known VAT fraud, well done for coming up wiht something an acocuntant charged loads for, before we spotted it and shut it down!
I could (if I wasn't so knackered find you the piece of legislation that shut this down, but it is basically along the lines that the 2 companies cannot be related (or something liek that)

It sucks, I know. I rememebr getting a major bollocking from my boss once for agreeing with someone in your position that it was crap of the government not to allow a get out.

KatyMac · 04/04/2008 22:46

I don't want to do fraud I am the most law-abiding person you could ever meet - the only parking ticket I got was a single yellow lie which was only no parking on a sunday morning (how bizarre is that)

But the government wants good cheap childcare

I can nearly supply this

It's crap

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ChirpyGirl · 04/04/2008 22:50

NQC, as a village hall or similarly in providing social or recreational facilities for a local community.
that bit means that that woudl be it's sole use unfortunately, so KM can't use that as the buildings main use is obviously going to be for business.

The problem with exempt services is that there is no way to claim VAT back on them. Even if you did do some vatable service as well then you could only claim back a proportion of the VAT paid out.

KatyMac · 04/04/2008 22:51

Childcare is exempt

What about education? isn't that zero?

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VeniVidiVickiQV · 04/04/2008 22:52

You need the advice of an accountant. You'd need one anyway really if you were going to set up a company because there are various company formation procedures you'd have to go through.

However, any good accountant worth his salt would advise you against anything remotely fraudulent or that looked like money laundering.

ChirpyGirl · 04/04/2008 22:55

I know you wouldn't do fraud intentionally, but I am genuinely very impressed that you came up with that! We had to add a bit into the law to stop it!

KatyMac · 04/04/2008 22:55

I have 2 companies atm

When I was going to borrow off the bank - I made a Ltd co

Now I'm off to borrow off to co-op people - I have a co-op company

Me & existing accountant have parted company (not returning calls, very expensive, inaccurate advise) - so I'm looking atm

I am thinking female, local, a brain, a sense of humour as minimum requirements

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KatyMac · 04/04/2008 22:56

Can we do anything with the fact that the co-op is a social enterprise?

(I obviously have a subversive sub-conscious)

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VeniVidiVickiQV · 04/04/2008 22:58

whereabouts are you KM?

KatyMac · 04/04/2008 22:59

back end of beyond Umm Norfolk? Very East

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VeniVidiVickiQV · 04/04/2008 23:03

Gah. I know some in Cardiff, the city (london) and North London. No-one near norfolk to recommend though.

KatyMac · 04/04/2008 23:05

I ave a lead - one of DD's guide friends mum's is an accountant (maybe - you can never be quite sure with 10yo girls)

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KatyMac · 04/04/2008 23:05

I am sure the social enterprise is relevant

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NotQuiteCockney · 05/04/2008 07:29

I think it should be relevant. But unfortunately I'm not sure it is.

KatyMac · 05/04/2008 08:39

bloody government

I think this is it for the nursery - we can't afford it with VAT

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ChirpyGirl · 05/04/2008 20:07

Sorry, had to go in a hurry last night, child related issues...

As NQC says, it should make a difference but as it is residential only a building used for a relevant charitable purpose would qualify

(This is from public notice 708 - Buildings and construction)

3.1 The basic conditions for zero-rating the construction of a new building
3.1.1 Introduction

If you construct a new building you will normally have to charge VAT at the standard rate. You may, however, be able to zero-rate your supply if you are involved in constructing a new:

  • eligible dwelling (referred to as a building ?designed as a dwelling? and explained at paragraph 14.2);
  • building that will be used solely for a ?relevant residential purpose? ? see paragraph 14.6; or
  • building that will be used solely for a ?relevant charitable purpose? (for non-business use or as a village hall ? see paragraph 14.7).

    14.7 What ?relevant charitable purpose? means
    14.7.1 The definition

    ?Relevant charitable purpose? means use by a charity in either or both of the following ways:

  • otherwise than in the course or furtherance of business ? see sub-paragraph 14.7.2;
  • as a village hall or similarly in providing social or recreational facilities for a local community ? see sub-paragraph 14.7.3.

    Buildings typically seen as being used for business purposes:

  • membership organisations where the organisation charges a membership fee
  • school buildings where a fee is charged for the provision of education;
  • offices used by charities for administering business activities, such as fund-raising events where an entrance fee is charged; and
  • village halls and similar buildings, but see below.

    I'm really sorry, like the others say, get more advice but I honestly don't think there is any way round it.

    Might be worth having a chat with your builders to see if they can reduce anything as they can still claim back all their VAT, the difference between a cheaper job and no job might be worth it?
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