Industry & PartnersMortgage BrokersDevelopment Finance: VAT Can Directly Affect Your Client's Peak Funding Requirement
For developers, VAT is not simply an accounting issue. If construction works are charged at 20% when the correct treatment should have been 5% or 0%, the developer may have to finance that additional cash requirement until the position is corrected or recovered — inflating the peak funding requirement and the cost of the facility. A construction VAT review before and during the build helps keep project-cost assumptions accurate and avoids financing VAT unnecessarily.
A developer undertaking substantial conversion works may have contractors charging different VAT rates across the same project. Every percentage point charged in error is cash the facility has to carry until it is corrected or recovered. For the finance adviser, an early VAT review can mean more accurate project-cost assumptions, better cash-flow forecasting, reduced risk of avoidable VAT funding, and fewer unexpected project-cost increases.
Residential conversion and development projects can legitimately carry 0%, 5% and 20% elements across contractors, subcontractors and direct purchases. VATBuild reviews contractor VAT treatment, qualifying conversion works, ESM installations, procurement and invoice treatment across the project.
Commercial-to-residential development and barn conversion works frequently qualify for reduced or zero rating that contractors miss. The developer finances the difference until it is corrected — a direct hit to the funding position.
Some construction VAT opportunities depend on how the work is procured and supplied. Identifying the position before the contractor is appointed or the invoice is issued is considerably more valuable than reviewing VAT after completion.
The VAT position of the completed development — and the developer's input VAT considerations — also depend on decisions made during the build. A project-level review before and during construction identifies where the position needs checking rather than waiting until completion.
VATBuild reviews the project type, previous property use, proposed use, planning position, procurement route and works being undertaken, so potential construction VAT treatments are identified early. During construction it reviews contractor and subcontractor invoices, direct purchases, incorrectly charged VAT and supplier corrections — giving the developer and their adviser a clearer picture of the true funding requirement.