Residential Build to Rent – VAT
The press article attached over the weekend was a useful reminder as to how new approaches in the property market have the potential to trigger unplanned VAT consequences. There is a growing trend in the private sector market to build residential units for rent rather than sale. It’s a market attracting major investors and pension funds it would appear, as the article notes, looking for longer term and less volatile returns on investment presumably. VAT costs are not normally a concern, outside of cashflow, on major “build to sell” residential projects but this move from sale to rent does has the potential to upset the proverbial apple cart if VAT aspects are ignored.
Key could be areas where a developer, having planned to sell a new build scheme or office conversion to flats, then reverts to a rental model. A more fundamental point however, sits within the nature of the planning consent obtained for a build to rent project. Planning authorities may welcome such developments into regeneration areas of tired city centres but take care on the nature of any restrictions they put in place to achieve consent. The worse case could be that such restrictions remove the ability to access the VAT relief on their construction and that really could make the VAT position quite complicated.
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