VAT Registration

If your property business falls under the scope of VAT and would like to register for VAT, the property VAT experts at UK Property Accountants can help to advise you and register your business for VAT. 

Property VAT is usually complicated compared to registering a non-property business for VAT because of special additional forms and interest from HMRC on the sector. So, having specialist property VAT experts carrying VAT registration will make this process smooth. 

Who needs to register for VAT?

Any property business with an annual taxable turnover of more than £85,000 needs to register for VAT. Rental income from residential property is exempt income, so residential landlords are not required to register for VAT. However, rental income from commercial property is taxable if the property is opted for tax.

It is beneficial for Property developers (both residential or commercial) and construction companies to register for VAT as they usually have VAT refund claims to be made with HMRC.

When does a property business needs to register for VAT?

A property business usually needs to register for VAT, if either: 

  • the value of taxable supplies made in the previous 12 months exceeds the VAT registration threshold of £85,000, or 
  • At any time, there are reasonable grounds for believing that the value of taxable supplies to be made in the next 30 days on their own will exceed the VAT registration threshold.

These are compulsory VAT registration criteria. However, a property business may want to register for VAT voluntarily.

What are the benefits of Voluntary VAT Registration?

A property business may want to register for VAT voluntarily, mainly for the following reasons:

  • Credibility - a VAT registered business is generally considered more credible for customers and suppliers
  • To recover VAT paid on purchases - VAT registered businesses can claim the VAT paid to the suppliers if the purchases are used for the taxable business. In the case of a business like new-built residential property developers, there would be VAT refund receivable from HMRC.

However, the VAT registration decision should not be taken lightly as there is quite a bit of compliance involved and hefty penalties for non-compliance with VAT laws. Also, if your customers are not VAT registered, VAT will be additional costs to them, and so you will not benefit by the voluntary registration of VAT.

How far can I go back for claiming VAT?

VAT can be claimed even if the actual purchases were made before the effective date of registration in the following two situations:

  • goods acquired for the business within the previous four years are still owned at the date of registration, or 
  • services are supplied for the purpose of the business in the six months prior to registration 

What additional information is needed for VAT registration for property developers?

For VAT registration of property developers, the first thing to ask is whether the property is opted for VAT or not. Together with the option to tax, property developers also need to submit a VAT5L (VAT registration – Land and property) form and the VAT registration form. It is a good idea to provide property-related documents such as planning permission document, site plans, etc. as well.