VAT 1614D: the FAQs

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Last time I explained that you can buy certain commercial property VAT free for residential use/conversion by using the VAT 1614D procedure. You can use this scheme whether you’re buying an old barn or pub to convert into your home, or buying an office block to convert into luxury apartments.

You can do this when the vendor has “opted to tax” the property, which normally means that he has to add VAT to the sales price. Using the VAT 1614D certificate means that the vendor has to sell the property to you without VAT.

N.B. I wanted to clarify one point about how much VAT you’ll save. The way the calculations work, your actual cost is reduced by 16.67%. Why is this when the standard rate of VAT is 20%?

• Net property cost: £300,000
• VAT @20%: £60,000
• VAT inclusive price : £360,000

This means that the proportion of VAT on the VAT exclusive cost is 20%. The proportion of VAT on the VAT inclusive price is £60,000/£360,000 = 16.67%.

Either way, it could be a lot of money.

EVERY RESIDENTIAL PROPERTY DEVELOPER NEEDS TO KNOW THIS RULE BECAUSE IT IS THE EASIEST WAY TO SAVE YOURSELF A LOT OF MONEY.

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Marie
March, 2016