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.

End of Tax Year filing; don’t take your finger off the VAT button!

Tuesday, October 30, 2012

by Nick Ryan

It is that time of year, the pay and file deadline is looming and the tax due has to be paid. Like Halloween, the tax calculation can bring a deathly palor to many a client’s face and scare many to take drastic measures. For some this is an extremely tough time with decisions to be taken in order to manage the tax liability calculated and/or, consider ways in reducing the liability to an affordable level. VAT as a tax can often slide off the horizon and can, if forgotten, result in further nightmares ahead.
The pay and file deadline often brings with it a hive of activity in restructuring client’s business affairs and investments and this is when there is a need to keep that eye on the VAT button in order to ensure all taxes are covered.
Some examples of where VAT needs to be considered when appraising the investment portfolio and considering possible disposals for tax savings are:
Commercial property investment portfolios: Any disposal can have a VAT consequence particularly where the client deducted VAT on acquisition or development of the property; a Capital Goods scheme adjustment will need to be considered and any potential claw back of VAT on disposal has to be taken into account against the potential yield of the disposal.Also consideration should be given to changes in the VAT legislation for land and property in 2008 and the complexities this provided in relation to the impact of these rules on properties acquired or developed prior to July 2008.
Restructuring business activities: This can include disposal and/or acquisitions. Here consideration as to the application of the transfer of a business or going concern rules is required to avoid any potential VAT costs and charges that might, where the treatment is later found to be incorrect, not be recoverable and therefore prove to be an unwelcome additional cost to a business.
Property investments: One area that is biting many an investor is that of the holiday/residential home investment. Care here needs to be taken when considering both the current modus operandi of the property and in disposing of an interest in a holiday property as to VAT liabilities arising from either changes in the basis of operation and where the property is sold. From experience some investors have suffered VAT liabilities that far outweigh the financial gain in disposing of the property. Also, for investments in residential property held under long letting arrangements, consideration needs to be given to the VAT history of the property and whether it was acquired under the “old” rules. Think waivers in exemption and claw back adjustment calculations.
These are just some of the issues that may require consideration when reviewing the client’s affairs in determining their tax position for the year. As you can see, just these three examples provide for a number of potential pitfalls that could result in a more significant financial cost to the client than the tax saving the quick decision could provide for.
We provide assistance to accountants and general tax advisers in managing their client’s VAT affairs and can complete VAT property assessments which can provide the client with a detailed VAT analysis for the options under consideration together with recommendations on planning solutions for their investments if required.
Should you have any comments or questions on this or, on VAT matters or the services we provide then please contact Nick Ryan at advice@thevatpractice.ie or on 00353 238838181