Accountancy
IVA fees and VAT
A recent Tribunal ase could have significant repurcussions for insolvency practitioners implementing IVAs. In the case…
28.02.2011
VAT and Holiday Homes
Holiday homes The VAT position on holiday homes can be very complicated - as different terms and definitions are used in respect of different aspects of the law applying to holiday homes i.e. the construction, sale or letting. Even HMRC are known to mix up the definitions. There have recently been a number of cases dealing with various arguments and scenarios. Standard rated - property not permitted for permanent residential accommodation If a dwelling can not be used throughout the year as the principal private residence, because it is prevented by the terms of a covenant, statutory planning consent or similar; it does not qualify for zero-rating. If the dwelling is new (under 3 years old) this normally means its sale is standard rated. There have been a number of cases over the years considering what is meant by the terms limiting zero-rating, most recently in the First Tier Tribunal (FTT) in the case of Mangogrove. In this case there was a planning condition that it should only be used for holiday purposes and not as permanent residential accommodation. The appellant argued that whilst the apartment was holiday accommodation it was also the owners' principal private residence. A number of relatively unique scenarios were envisaged where this could occur; but they did not apply in this appeal which was dismissed. Holiday Home arrangement not "abusive" The Upper Tribunal has overturned a decision of the FTT. It held that a taxpayer's arrangement was not an abuse of rights, thereby minimising the VAT on a holiday home to the construction services, with a separate supply of land being exempt. For the arrangement to be feasible a number of factors have to be managed - but it does provide an opportunity for builders and buyers of holiday homes. It remains to be seen whether HMRC will appeal this decision -as the principle is one that can apply across many scenarios.
Owner: Longboat VAT Advisers LLP
Contact: barry.stocks@longboat-vat.com
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