Singing Pig

Hi All

I've been a regular reader of the SP forum for a couple of years and know this is the place to get reliable advice on this. 

My fiance has a limited building company which is VAT registered but wanted to move away from building works done for customers to concentrate on doing BTS properties for ourselves.  The limited company is in his name only but the properties are bought in our names, not owned by the company.  The accountant he uses advised him to pay the limited company to do the refurb works on the properties, but surely this means we are charging ourselves more VAT then could be reclaimed by the company on materials etc.

Also, as the BTS properties are the only work he is doing, is it even worth keeping the limited company going when you consider the extra paperwork and costs of annual returns, VAT returns and payroll etc?

As I said, I've learned a lot from the forum but sometimes feel I read too much and get more confused so any advice is gratefully received.

 

I would say it's always worth keeping the Ltd. Co on. They do come in really handy.

Just a thought...if you anticipate your profit from BTS dropping below the threshold (is it £60k?) why not 'de register' the VAT?

 

 

bit of an expert on this so if you want specifics please ask.

i have a VAT registered LTD building company that buys plots/conversions or simply pull houses down, i then build a house or convert the property (change of use) i am then able to reclaim all or at least the majority of the VAT this is potentially 17.5% more profit , however if you reclaim VAT you must sell the property at the end of the project.

you can not get any advantage using this method for renovations as you cannot reclaim the VAT on straightforward renovations, however because i also do one or two renovations each year through this company i can reclaim all the VAT under deminimus laws.

 there is a lot of money can be made using this legal method, i have had a couple of investigations over the years and usually they are telling me i have underclaimed - just to give you an idea i usually reclaim £10,000 each quarter.

 

Many thanks for your advice Craig and Homebuyer

De-registering for VAT may well be an option, he really needs to meet with hs accountant and get everything up to date. 

Regarding the works you do Homebuyer, do you buy the land/properties in the company name or your own?  It does sound as though your works are on a much larger scale as before we decided on BTS for ourselves, the works were mainly residential extensions/alterations etc for local architects.  For our BTS he was advised to treat it as a customer's job, buy in our names, the company charges us for the works, then the company reclaims the VAT on materials etc.  However, surely to show a profit the company charges us more VAT on the works than it incurs whilst doing them which is the bit I can't get my head around.      

Sorry if I seem really unclear on this, I know we need to get a good accountant who can advise on tax etc whether we go down the BTL, BTS or BMV route from now on.  We have one BTL and completed another BTS in December but no takers yet!!!  I just can't fathom if keeping the Ltd company going will be of any benefit.

you are unlikely to find an accountant who really knows their stuff regarding property VAT i know more than mine to be honest.

i used a vat consultant to set up my system and know and again he comes to check we are operating it correctly. i have no tie in with this guy www.thevatpractice.co.uk

you are right, if you buy the house in your name and the ltd co charges for the materials and labour you are paying over the odds - a waste of money as you pay an extra 17.5%.

 

Thanks again, you confirmed what I thought. I really can't see the point of keeping the LTD co in our case as he's much happier doing properties for ourselves than having customers on the phone 24/7. The £1500+ annual accountancy cost for payroll, returns, accounts etc for the company also seems like a waste of money, it may as well be used for our personal tax returns/accounts. I will have a look at the company you suggested for VAT queries and will also be looking for an accountant who can advise us properly on property and tax planning. We sold our first BTS last year, have one that's finished that we may have to let due to no interest and one ready to start so now is the time for the proper advice I think!! Cheers, Julie

Craig:

I would say it's always worth keeping the Ltd. Co on. They do come in really handy.

Just a thought...if you anticipate your profit from BTS dropping below the threshold (is it £60k?) why not 'de register' the VAT?

 

 

VAT Registration/De-registration is based on turnover not profit.

The threshold is £67,000 from 1 April 2008.

JACEY:

Thanks again, you confirmed what I thought. I really can't see the point of keeping the LTD co in our case as he's much happier doing properties for ourselves than having customers on the phone 24/7 ...

But don't fold the company (liquidate it).

Make it dormant. That costs almost nothing each year, other than the company return. It then just sits there, but is ready if anything comes up where it would be useful to make use of it. Companies House has a booklet on dormant companies - might pay you to go on their site and download/order it.