Munster’s first independent VAT consultancy practice providing specialist VAT and Indirect tax advisory, assurance and interim management support services to owner managed businesses, small & medium enterprises, accountants and legal practices.

VAT and Holiday Cottage Schemes: Ticking VAT time bomb?

Tuesday, April 5, 2011

by Nick Ryan

We are all aware of the massive uptake in the property boom of people investing in holiday cottage schemes, hotel suite schemes, golf course accommodation schemes and residential/retirement home schemes. This was to take advantage of the suite of tax shelters available at the time and the belief that the rise in property values would not falter.
The result now is not at all as sweet as anticipated and many investors now find themselves in that unexpected situation where the investment could well develop into their worst nightmare of an exposure to a high, and unmanageable, VAT cost. This can happen for a number of reasons though it is essentially driven by the life expectancy of the investment scheme.
A number of the schemes are beginning to unravel and some are highlighting basic mismanagement of the scheme itself. In both cases the VAT risk largely lies with the investor, the majority of whom may well be oblivious to what is happening and may be too late in taking any possible steps to shore up their VAT position. For those investors we have identified as having a VAT liability we have no choice but to recommend that action is taken and Revenue are contacted, by not doing so, where do we stand?
Bearing this in mind we appear to be blessed with a Revenue that is content to sit and wait and not risk the wrath of the press if found to be wantonly pursuing the common man for their mistaken over exuberance to dance with the tiger. But for how long can this be? When will we see the shackles of restraint lifted and the pursuit begin? Revenue has all the information to hand as they processed all the 4A applications, a walk in the park for Revenue you might think. I would agree.
So what should investors do? Take stock of their investment and look at the worst case scenario. The VAT Practice can provide investors with a timely review together with options for how best to manage their potential ticking VAT time bomb and perhaps, just stop the clock.
For more information on how we can assist investors please contact the VAT Practice.