Q- My client is a housing developer and bought some land in August 2016 on which he incurred VAT. At the time of purchase, he intended to build new dwellings for sale (zero-rated taxable supplies) and therefore he claimed back the VAT incurred on the October 2016 return. However, upon completion of the site in January 2018 the developer changed his mind, and now, for the first time, he intends to rent 50% of the properties out (exempt). What happens to the VAT he has claimed?
A- Input tax can be reclaimed on goods or services where they are used, or intended to be used to make taxable supplies.
As your client intended only to make taxable supplies with the land, he was correct to claim back the input tax in full at the time.Had your client changed his intention within the same partial exemption year as the claim for input tax (i.e. by April 2017), then any input tax claim would Read More