New queries, issue 4389

Deferred sale

I have a client who is a property developer and has constructed two residential properties: one project converted a barn into a bungalow and the other project built a detached house on a bare plot of land.

My client is unable to sell either property so has asked whether it would create a problem if he rented them out for 12 months and then sold them in a year’s time when he anticipates that the property market will have improved.

My concern is about VAT and whether this decision means he will lose all or some of the input tax he originally claimed on building materials and professional fees on the basis that he is making exempt supplies (rental) rather than a zero-rated sale of a new dwelling (taxable).

In the case of the conversion project he was also charged 5% VAT by the...