Repair work carried out on goods for overseas landlord
Our business repairs and services dishwashers and washing machines and a lot of work is carried out for a local property letting business that manages buy-to-let properties on behalf of the owners.
Our work is subject to VAT and we issue invoices addressed to the maintenance manager at the agent, showing their address in Leeds. We always quote the property address where the work is carried out.
The agents are saying that ten properties they manage are owned by an overseas landlord company based in China and that for these properties, we should not charge VAT because the work is for a non-UK owner. The agent has quoted VAT Notice 741A, para 9.7. However, is my business actually working for the agent or the landlord? And do we need more detail about the overseas landlord’s trading name and address?
My gut instinct is to insist on charging VAT on all our invoices – a play safe approach – although para 9.7 suggests otherwise. Do readers agree?
Query 20,795– Boschy Bob.
Unusual company structure
We have taken on a new client within a corporate group that has an unusual structure. The holding company is based in Spain and has no tax presence in the UK. It owns 100% of the shares in our client, which is a UK trading company. Our client company owns 100% of the shares in another Spanish company. This is an investment company holding properties in Spain and elsewhere in Europe. The Spanish holding company also owns shares in a number of other EU companies.
We didn’t advise on setting up this structure and don’t know the rationale for the Spanish investment company being owned by our client. Can readers think of any reason why this might have been done – as far as I can see the companies don’t form a group relief or capital gains tax group. It would make sense for the investment company to be transferred to the ownership of the parent company, but could that be done without creating a tax charge? I don’t think that the substantial shareholding exemption (SSE) would be available. Do readers have any thoughts on this rather odd situation? Is there something that we have missed?
Query 20,796– Toreador.
Last orders, please
Our client is proposing to buy a public house from a brewery company. The public house is subject to the vendor’s option to tax. The value is below the capital goods scheme threshold.
The client runs a property development company that is registered for VAT. The public house consists of a public house area on the ground floor and a self-contained flat on the first floor. They intend to convert the building into a house of multiple occupation (HMO), consisting of several bedsits with a shared kitchen and bathroom.
I would like to check several points.
I understand that the reduced rate of VAT at 5% applies to the conversion of any building that does not include a multiple occupancy dwelling into a building containing only one or more such dwellings (VATA 1974, Sch 7A Group 6 item 5). HMRC has previously stated that this relief is meant to encourage the provision of private accommodation for people who cannot afford or obtain a mortgage.
Second, my client intends to provide a VAT 1614D certificate to the brewery selling the pub, which will disapply its option to tax on the public house portion; I presume the option to tax cannot extend to the living accommodation on the first floor.
Third, once the works have been completed, I believe that it would be possible for my client to reclaim the VAT he has incurred at 5% on the works by making a grant of a major interest in the building to a separate limited company, which will then rent out the bedsits in the HMO to tenants.
Do readers think that my understanding of this is correct?
Query 20,797– Partridge.
Overseas fundraiser
Our client is the director of a UK limited company. She spent her gap year travelling in Australia and while there she spent time volunteering at a children’s hospice. She has kept in touch with some of the people she met at the charity, and when she found out that one of them was undertaking a sponsored half marathon for the hospice, she nominated them for a charitable donation from her company.
The individual and the charity she is running for are both Australian and have no connection with the UK. Am I right in thinking that the company would not be able to obtain tax relief for the donation because it is not to a UK charity?
Is there any other way in which the company might obtain tax relief: could it perhaps sponsor the marathon and claim that as a business promotion expense? Would the position be any different if the director herself made the donation personally?
Query 20,798– Warm Hearted.
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