VAT on Property and Construction

The VAT that a business incurs on its purchases and overheads is called ‘Input tax’. For businesses that only makes taxable supplies (either standard-rate, lower-rate or zero-rate) this input tax, with the exception of certain specifically excluded items, such as business entertaining, is fully recoverable.

A VAT registered business which makes exempt sales cannot charge VAT on those exempt sales, the consequence of which is that it cannot usually reclaim the input tax it incurs on purchases and overheads used in making those exempt supplies.

Property and construction can involve all the UK VAT rates as well as VAT exemption, which means that planning is necessary in order to ensure that the input tax recovery position is maximised.