Profound VAT shake-up in construction

Article Abstract:

The UK value added tax (VAT) rules on property are going to become very complex because of the European Court of Justice ruling on 21 June stating that UK zero-rating of new construction is not in accordance with treaty obligations. New residential construction will continue to have a zero-rating. Supplies to the building industry that are not supplied to 'final consumers' are now taxed at the standard rate. The Treasury's proposed response includes: non-domestic construction services, buildings and land for non-domestic developments will all be taxed at the standard rate; construction and demolition of non-domestic buildings and civil engineering works will have to be standard-rated; the 'approved alterations' for domestic buildings will no longer have a zero-rating; and landlords have the option to tax the sales and leases of used non-domestic buildings at the standard rate. Most of the provisions go into effect 1 April 1989.

United Kingdom, Construction industry, Construction, Tax policy, Building, European Union. Court of Justice of the European Communities

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VAT clinic on land and property

Article Abstract:

Penalties for errors in the computation and administration of value-added tax (VAT) on property will begin Jan 1, 1990. The direct tax consequences of the VAT make thorough planning for VAT extremely complicated. Questions have arisen on the issues of whether to opt to tax in the areas of: industrial units; renovating and letting offices in city centers; and agricultural rent for tenant farmers. Businesses must opt to tax for industrial units in order to get reimbursed for VAT paid on construction costs, repair, and maintenance. Businesses should not opt to tax for city center offices unless large amounts of VAT have been incurred in renovation. Businesses do not have an option to tax on residential buildings, and the value for the rent of tenant dwellings must be treated as exempt, and the VAT on renovations may not be recoverable.

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Property VAT changes create new minefield

Article Abstract:

Great Britain's 1989 Finance Act is likely to alter value added tax (VAT) ratings of property, which will ultimately affect VAT planning for property transactions. The 30% penalty for declaring the wrong amount of taxes and interest for VAT recoverable by assessment will be unveiled with tax rating changes. Areas expected to bear the effects of changes include: housing land; charities; and agricultural land and estates. Banks and insurance companies may have additional VAT costs after Apr 1, 1989 unless certain steps are taken. Leases of commercial buildings; premiums on rated leases; and interests on property may also be affected by alterations in the VAT ratings.

Standards, Interpretation and construction, Tax law

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