VAT on conversion of commercial property to residential use: onward intention of the developer

This is particularly important and determines whether you can recover VAT on the construction costs and other professional fees of the conversion project.

If your intention is to sell outright the newly created residential units, your first sale will be VAT zero rate (0%), and you can recover VAT in full on costs.

If your intention is to let the newly created residential units, your sale will be VAT exempt, and you cannot recover VAT on costs. However, there is a legitimate method of recovering costs in these circumstances.

If you plan to temporarily lease the new units and then sell outright later, you can recover some of the VAT on costs.

Any commercial development comes with a range of challenges involving determining the correct VAT rate and input tax reclaims.

To discuss this in further detail, please get in touch with one our experienced Indirect Tax Services team.