Re-sale Of A New Build Property

[Bruno]

We bought a new build villa in May 2004 and got the keys after final build completion in March 2005. We are still resident in the UK and use the villa for holidays and summer lets. We are now thinking of selling the property but have been told that for VAT reasons we should wait until we have been in possession of the property for over 2 years. Could anyone clarify the situation to us and let us know what our VAT liability would be if we were to sell before or after March 2007?

Thanks in advance!

Bruno

[BJSLIV]

The relevant period is in fact five years. If you sell less than five years after the house was notified as being completed, they deduct VAT from your profits.

Example 

Purchase price                                                                                  100, 000   which includes VAT of  16388

(including any additional work such as kitchens, fencing etc as long as you have all the bills)

Sales Proceeds                                                                                 140,000    which includes VAT of   22943

VAT payable   22943 less 16388  = 6555

Plus

Capital Gains Tax of  140,000 less 100,000 = 39,000 (after 1000 ignored) @ 16% = 6240

TOTAL PAYABLE 12795  (IE roughly 32% which is in effect the rate that applies whatever the gain) 

The good news is that unless you have a large gain, or are subject to income tax at 40% you are unlikely to have any further CGT liability in the UK.

 

 

 

[BJSLIV]

You can certainly include the land in the cost, unless you are selling a mobile home![:)]

 

But the five year clock starts ticking from the date on the Achevement des Travaux form submitted at the completion of the building project.

[BJSLIV]

If you include the cost of the land that will automatically reduce the gain/profit. So the answer is brown.