Advising on property tax means dealing with more than minimising tax liability – my expert team of property tax specialists at Optimise Accountants also advise on VAT basics for property investors, too.

And I’ve been asked by a few buy-to-let landlords recently to publish a blog post dedicated to the subject of advice, hints and tips around VAT for individuals investing in property in the UK.

For example, do you know that VAT may be claimed back on your refurbishment projects?

Plus, have you ever thought whether or not VAT should be charged on your rental incomes?

VAT basics for property investors

As a leading property tax expert, I advise my clients that in general terms VAT is charged on goods and services supplied from a UK entity to another. That means that you will need to add on 20% VAT to your sales price.

However, how do property investors figure in this VAT realm?

HMRC have helpfully provided a list of services that are either VAT exempt, 0%, or 5% VAT rates, which I’ve condensed below to make it easier for property investors to read:

VAT exempt activities for property investors

• Rents applicable to residential properties
• Garages or parking spaces let together with dwellings (under shorthold tenancy agreements) for permanent residential use
• Parking – grant, or licence, to occupy land on which incidental parking takes place
• Property, land and buildings – grant, or licence, to occupy land or buildings

You should note that residential property investments that are rented to tenants are never subject to VAT. This means that you do not charge tenants VAT, and you cannot claim back VAT – if you’re unsure on this point, please get in touch with me via the contact form at the end of this blog post.

5% VAT rates for property investors

• Converting existing premises by increasing the number of dwellings within the building
• Renovating a dwelling that has been empty for at least two years

In regards to VAT exempt and 5% VAT rates, property investors are unable to reclaim any VAT that they’ve paid. My team of property tax specialists can advise you further on this.

We have written another article here on this subject.

0% VAT rates for property investors

• Substantial reconstructions to protected buildings that are buildings used as a dwelling, for a relevant residential purpose or for a relevant charitable purpose
• Construction and first freehold or long leasehold sale of a new building for a relevant residential or charitable purpose
• First freehold or long leasehold sale of a commercial building converted into a dwelling or dwellings
• Sale or long lease of a new dwelling with garage or parking space

In regards to 0% VAT rates, property investors can claim back any VAT that they have paid. This is usually the case when property developers build new houses or converts commercial properties into residential use for the very first time. If unsure how this might affect you, get in touch with me to discuss further.

Property investment activities where VAT applies

Many property investors have multiple streams of income, and it’s important to identify the types of income that you will need to charge VAT once your taxable turnover reaches £83,000 per HMRC’s guidelines.

• Property management/letting businesses
• Sourcing of properties
• Project management
• Consultancy
• Property maintenance

Once you have generated sufficient income to be VAT registered, it’s advisable to complete the HMRC form VAT1.

I can assist you further on this, as well as providing a team of property tax experts to help you. To find out more about how my team of expert property tax accountants can advise further on VAT, please feel free to get in touch here.

How to engage with us

If you want to understand how to implement this strategy or to discuss other finance/tax questions then please book some time with me and my team of property tax specialists using the below calendar.

Please use the redeem code “Article 33” to get 33% off your next consultation call.

If you are looking for a new accountant, then please book some time with us using the below calendar. Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.