Yes tax is boring, but it’s important too, and despite what you may think it’s extremely important for the Build to Rent sector.
While we may be banging the drum on separate use classes or affordable housing methodology, perhaps we should turn more attention to how VAT is applied on homes for rent.
Homes sold on the open market are ‘zero rated’ and so pay no VAT. But If I rent you the flat, because it is an investment, I have to charge you VAT at 20% on the rent.
But you are not going to pay that, so I would have to make it VAT exempt, meaning I am unable to claim back my own VAT charges.
Given the majority of BTR developers are building new homes – rather than digesting those built for sale as buy-to-let investors do – Build to Rent investors should be treated differently, as far as VAT is concerned.
You can offset it through capital gains, but you cannot avoid it and it is a needless drag and a disincentive that may reduce likely investment into the sector.
As I said – it may not set the front pages alight or be the top recommendation of any white paper, but it’s important none the less.