VAT advice for Architects

Have you heard the story about the architect who put an internal door in a house that led to another separate dwelling, which then created a big VAT bill?

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Even though the door was then blocked up, because HMRC knew the original plans had that door in them, they would not allow the application of zero rate VAT. A costly mistake!

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We all know that land and property is very complicated, and sometimes the design of something and what you use can really impact on the VAT treatment. Additionally, you may be involved with projects that may benefit from the reliefs for charities, or the reduced rate, or reliefs available for disabled use.

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We can help you to identify where VAT reductions and reliefs can be applied at the 5% or zero rate. You can simply send us a schedule of works and we can go through it and identify any VAT implications before they become an issue for you.

HMRC will request a reference from you and if you are VAT registered, this reference is your VAT Registration number. Your query is then logged against your file.

 

It has been known for a visiting VAT Inspector to look at the queries asked by a business of the HMRC helpline to try and determine whether there is an area that appears to be causing difficulties.

 

At the visit, the Inspector may then focus on that area to see if there is an under declaration of VAT because of misunderstanding the rules.

 

Also, generally, HMRC will only talk to the persons specifically named on their records, so if your name’s not down – you’re not coming in!

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HMRC will NOT advise on a hypothetical situation, so you cannot have a general VAT chat about your affairs and what you are planning to do.

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If you rely on advice given by HMRC which is later proved wrong, then it is down to you to be able to prove that you gave HMRC the full facts of your query in the first place so that you can rely on the advice they gave you!

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HMRC are quick to point out that VAT is a ‘self-assessed tax’ so, unfortunately, it can be difficult to get advice from them.

Of course, there may be some occasions when an approach to HMRC (to the written enquiries) on a VAT issue is the best way forward and we will advise you of these times and guide you accordingly.

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However, we do not recommend blindly sending in a written VAT query for a couple of reasons.

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We were once asked to act for a charity who wanted to maximise their grant income after they had sent a perfectly innocent letter to HMRC VAT Enquiry centre asking for guidance as to how they should structure their affairs to achieve the best VAT saving.

 

Next thing, the local Tax Avoidance Officer became involved accusing the charity of illegally trying to avoid paying the VAT due when all the charity wanted was some advice to plan things in the most VAT efficient way. No law against that!

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HMRC tend to reject a lot of VAT queries because VAT is a self-assessed tax and they state it is up to you as the taxpayer to make the decision about your VAT liabilities.

 

Additionally, they will often simply state that they will not answer your VAT query because your question is covered in their public guidance. They then refer you to the relevant Public Notice.

 

Therefore, in order to get any VAT advice in writing, you must word your enquiry letter carefully so as to pre-empt HMRC’s stock responses.

 

If you receive some written VAT advice from HMRC, remember you still need to be able to prove you gave full (and correct) facts in order to rely on this VAT advice.