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Significant VAT saving for a property developer

During a review of the corporate affairs of a new client (a residential property developer) we identified a problem relating to the VAT exempt sales of ‘self-build’ plots. It became apparent that Input VAT had not been restricted under the partial exemption rules.

After working closely with the company’s bookkeeper and operations manager to attribute purchases between taxable/exempt supplies, we undertook the necessary partial exemption calculations under the ‘standard method’; we determined that over a 4 year period, the company had significantly overclaimed VAT.

We then considered various ways to reduce this VAT exposure, and identified that the company qualified for an alternative basis of calculation based on land area under the ‘standard method override’ rules, saving the company a substantial amount of VAT.

To ensure the company complied with its obligations, and had certainty in relation to the VAT payable, we submitted a Voluntary Disclosure Report to HMRC; we were able to reduce the VAT exposure and subsequently agree that no penalties should be charged on the basis of unprompted disclosure.

Finally, to assist the company with its VAT affairs in the future, we worked with our client to implement new bookkeeping procedures for the VAT partial exemption calculations.

Alex Newsham is our VAT specialist who advised on this matter.

Chris Smith provides ongoing tax advice to the client.

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