VAT and Capital Projects

1. VAT and Capital Projects VAT is important Important variable in the funding equation Potential to threaten viability of entire project Commonly neglected or given superficial consideration in the early stages.

2. VAT and Capital Projects Why overlooking VAT is bad in the early stages Hidden financial variable too optimistic creates risk too pessimistic degrades the business plan Credibility Degrades quality of funding targets Affects basis of application vat-exclusive applications vat-inclusive applications Hinders pro-active planning Business plans and applications

3. VAT and Capital Projects Technical Issues Basic Assumption: Standard-rate VAT will be due on the whole project Only 2 ways to gain relief: Zero-rating � avoiding being charged VAT VAT recovery � reclaiming through VAT Returns

4. VAT and Capital Projects Zero-rating New charitable buildings Parts of new charitable buildings Annexes to charitable buildings Parts of Annexes to charitable buildings Alteration work to listed charitable buildings Certain types of work to aid access and facilities for the handicapped New residential buildings

5. VAT and Capital Projects Zero-rating � conditions New building definition Charitable building definition Annexe definition Protected building definition Alteration work definition Residential building definition Conditions for relief re: handicapped facilities/access Scope of Zero-rating

6. VAT and Capital Projects Zero-rating Certificates transfers legal responsibility civil penalties for the Charity builders reluctance The 10 year rule change of use within 10 years business definition need to understand the rules well monitoring protocols

7. VAT and Capital Projects VAT Recovery VAT Registration Never straightforward for Charities Basic principles of VAT taxable supplies � recoverable exempt supplies � non-recoverable non-business activities � non-recoverable Use of building is critical Mixed use � partly recoverable need for methods and negotiation

8. VAT and Capital Projects VAT Recovery It is critical to carry out a detailed analysis at the outset Credible forecasts Range of options with numbers Greater structural and practical flexibility VAT-smart business plans and applications Credibility presentation to HMRC Work depends on complexity

9. VAT and Capital Projects VAT Recovery � Detailed analysis VAT treatment of proposed uses HMRC policy VAT Law Historic practise, changes in practise Relationship of uses to building floor area cost profile VAT Status of Charity historic practise (especially treatment of proposed uses) review trigger skeletons and jewels

10. VAT and Capital Projects VAT Recovery � Detailed analysis VAT Recovery forecast eg range 35-85% VAT Strategic Options liability options activity options space options status structure Numbers on options Formation of refined VAT strategy

11. VAT and Capital Projects VAT Recovery � Detailed analysis Formation of refined VAT strategy practical legal likelihood of success implementation cost timetable of actions

12. VAT and Capital Projects VAT Management process HMRC rulings hypothetical reluctance written ? unequivocal ? base on full knowledge of the facts definitely provisional Other forms of assurance authorised reclaims VAT assessments following visits 3 year rule specialist support and advice

13. VAT and Capital Projects VAT Management process Detailed Analysis VAT recovery forecast range VAT strategic options Strategy formation consideration and formation timing and implementation strategy Strategy Implementation VAT status, registration Contractors, Architects Business plans, applications, forecasts HMRC

14. VAT and Capital Projects VAT Management process Initial scoping VAT review If the issues are not complex or contentious the scoping review should confirm that fact. Detailed Analysis VAT forecast Strategic VAT options. Consider the Strategic VAT options and form a refined VAT strategy. Implement the VAT Strategy. Alun Mathias VAT Capital 02920 623655 alunmathias@vatcapital.co.uk