Buy to let businesses
Changes to the tax rules haven’t done landlords any favours, but so far, the government hasn’t touched the VAT breaks.
If you were to do a little planning you can lower the cost of buying to let, one of these is reduced rate of VAT, at 5%, which applies to labour and materials used on qualifying building work.
The reduced rate of 5% applies to the following types of work
· Refurbishment of a residential property that has been empty for two years or more.
· Conversion of a non- residential building into a residential one, e.g. a warehouse into flats (excluding registered housing association properties)
Although if you are in business and you convert commercial property into dwellings to rent out, you can’t take advantage of the 5% VAT break.
· Changing the number of dwellings in a single building, say converting a large house into flats or vice versa.
· Installing energy -saving materials and grant funded heating systems and qualifying security goods.
· General home improvements for residential properties on the Isle of Man.
The lower rate covers materials as well as labour, but only if they are supplied by the builder doing the work. If you personally buy the building materials, e.g. paint, in the local DIY store then you will pay 20% VAT without any chance of qualifying for the reduced rate.
This break has been around for some time, but it is not widely known about. The rules can be confusing. Take a look at our weekly blog page for more useful hints and tips.
We also provide a comprehensive service to landlords, where we can produce accounts and tax returns to make life a little easier. For more information click here.
Take advantage of our free initial consultation to discuss your accountancy, bookkeeping and financial planning requirements. Contact our professional and friendly team on (01509) 816150 or via the contact form below.