Beleaguered builders 'could face hefty VAT bills'

Date: 8th August 2008

Accountants have warned that builders trying to minimise their costs during the economic downturn could find themselves facing large VAT bills.

In an article in the Birmingham Post, accountants from RSM Bentley Jennison explained that builders were dealing with the lower demand for new properties by renting houses out and waiting until the market recovered to sell.

The experts explained that this was a very common practice during the last recession in the 1990s.

However, they stressed that the VAT rules on these deals have now changed, meaning that some builders could face large tax bills in the future.

"HMRC should reintroduce the concession bought in 15 years ago to help the beleaguered house builders simply trying to survive," accountant Keri Pay told the paper.

Another tax expert, Carol Barrie, said that many accountants were advising builders to "take the trading stock out of the house building company and own it separately as an investment asset".

"Not only does this overcome the VAT problems referred to earlier but where properties are going to be held long term as investment properties, matters can be structured in such a way that the owners of the investment properties pay only 18 per cent capital gains tax on the ultimate sale," she concluded to the paper.