Homebuilders to tap letting agents in tax dodge

News Category: Legal

This article was brought to you by Rentman the premium rent management software

Letting agents could be approached by more and more homebuilders over potential purchases in months to come, it has been predicted.

As the house purchase market has slowed homebuilders are increasingly opting to rent out unsold properties.

Recently, however, HM Revenue & Customs has since advised the landlords that doing so could mean they are forced to be forced to repay value-added tax they have already claimed back because of differing VAT treatment of selling and letting properties.

In response, Alex O' Connor of McGrigors has predicted that the builders could attempt to get around this extra charge by selling the properties to a letting agent or letting subsidiary.

He told FTadviser.com: "Housebuilders are already under severe financial strain as the price of newly built properties plummets and stock remains on the market.

"The only option in many caseswill be to rent, but having to repay VAT could cause severe cash-flow problems and in some cases even bankruptcy."

How to stay legally compliant with letting agency software